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Friday, January 3, 2014

‘Green Rush’ As Investors Pour Money In Marijuana

Sam Walsh, a budtender, sets up marijuana products as the 3-D Denver Discrete Dispensary prepares to open for retail sales on January 1, 2014 in Denver, Colorado. Legalization of recreational marijuana sales in the state went into effect at 8am this morning. (Theo Stroomer/Getty Images)

Sam Walsh, a budtender, sets up marijuana products as the 3-D Denver Discrete Dispensary prepares to open for retail sales on January 1, 2014 in Denver, Colorado. (Theo Stroomer/Getty Images)

One industry group says that the legal marijuana business will increase 64 percent this year and top $10 billion within five years.

Investors were watching closely this week as lines stretched around the corner at marijuana dispensaries in Colorado, the first state in the nation to legalize recreational marijuana use. Washington will follow shortly.

Meanwhile, marijuana and related products have become hot investments, complete with gatherings where marijuana start-ups make pitches to people interested in putting serious money into the industry.

The medical marijuana business conference had its second meeting this fall in Seattle, and 30 exhibitors paid as much as $16,000 each to attend.

However, because marijuana is still illegal at the federal level, banks are loathe to provide funding.  So why would investors take such a gamble on an illegal product?

“This is a risky business, and any business has risks and benefits, and where there are risks, there are often rewards,” Troy Dayton, co-founder and CEO of The Arcview Group, told Here & Now’Meghna Chakrabarti. “The writing is on the wall. Marijuana prohibition is very likely to end over the next five to seven years. If you’re an investor, and your game in the investment game is to get ahead of what’s going to happen, then this is often a good bet.”

Dayton’s organization is part of an accredited cannabis investment network.

But the growing industry has critics, who use the analogy of alcohol, which has been legal for 80 years. The critics say that 20 percent of of drinkers account for 90 percent of all alcohol consumption.

Critics say that these are industries that profit from the addict or the near-addict and worry that that is the model for marijuana.

“One of the key things to keep in mind here is that we’re not talking about a new substance, and there’s no panacea, there is no way to solve all the challenges of a particular substance,” Dayton said. “But one thing’s for sure, a regulated environment with legal businesses is going to do a much better job of handling this product than the current criminal market.”

Guest

  • Troy Dayton, co-founder and CEO of The Arcview Group, an accredited cannabis investment network.

Transcript

MEGHNA CHAKRABARTI, HOST:

Lines stretched around the corners at marijuana shops all over Colorado this week as the state became the first in the U.S. to legalize sales of recreational marijuana. One group watching with quiet, but intense interest: investors. Yes, investors, because marijuana and related products could be a boom industry. It's being called the green rush, complete with gatherings, where cannabis startups pitch to investors interested in putting seed money, as it were, into the industry.

In Washington, which has also legalized pot, the Medical Marijuana Business Conference had its second meeting this fall in Seattle, where 30 exhibitors paid serious money to attend. The Arcview Group is an accredited cannabis investment network, which also researches the marijuana industry, and it says in a new report that the legal marijuana business will increase 64 percent this year alone.

Troy Dayton is cofounder and CEO of The Arcview Group, and he joins us from the studios of the Berkeley School of Journalism. Troy, welcome.

TROY DAYTON: Thanks for having me.

CHAKRABARTI: So, first of all, tell us how you got into this industry and this business.

DAYTON: Well, I've been working to end marijuana prohibition since I was about 18. And my last job, before I started the Arcview Group, was I was the lead fundraiser for the Marijuana Policy Project, which works to change the marijuana laws.

CHAKRABARTI: So we should note that the Marijuana Policy Project is actually probably one of the leading groups in the country that's trying to push for legalization at the federal level. For as long as there's this gap between state and federal law when it comes to marijuana, there are also a lot of problems when it comes to doing business in cannabis.

I mean, for example, banks are staying out of this entirely, because they don't want - they can't, and don't want to take the money on that comes from the marijuana industry. So what do you tell your investors about that?

DAYTON: This is a risky business, and any business has risks and benefits. And where there's risks, there's often rewards. And so, you know, this is an industry that, when people get into it, they often get into it because they see it as an opportunity to take a stand in the world and an opportunity to stand up for what they believe is right. And in some cases, that means some civil disobedience.

CHAKRABARTI: When you say civil disobedience, in this context, what exactly do you mean?

DAYTON: Well, you know, cannabis is illegal in the country. And so anybody, even these - the stores that we see on television that are selling cannabis in Colorado, under regulation and have a state license and everything, I mean, they still are violating federal law.

ROBIN YOUNG, HOST:

Well, to that point, I mean, I can't imagine that high-net-worth individuals - investors, funds, anyone who wants to get into this potential high-growth industry - likes talk of civil disobedience. I mean, aren't - isn't the big money waiting for federal legalization? And for as long as that doesn't happen, what do you tell them?

DAYTON: They're not waiting. I mean, many of them are spending time researching, figuring out how they can play. And the writing is on the wall. Marijuana prohibition is very likely to end over the next five to seven years. If you're an investor, and your game in the investment game is to get ahead of what's going to happen, then this is often a good bet.

CHAKRABARTI: Now, Troy, if I may, I want to read you a quote from a recent article in the New Yorker, and that has to do with the fact that if indeed federal legalization does come about, that marijuana could become a larger industry in the United States than even tobacco. And this author in the New Yorker sort of talked about vice industries as a whole: gambling, alcohol, et cetera.

And he writes that 20 percent of the Americans who drink account for almost 90 percent of all alcohol consumption, and it cannot be news to beer and liquor companies that their key demographic is the problem drinker. The same thing goes for gambling. And that is exactly the worry that a lot of people have regarding marijuana, that if indeed all this money - you know, I'm seeing numbers that it could be $150 billion business if federal legalization happens - is going to come because you basically have to have a new generation of really heavy pot users. And the social cost of that is really high. Is that even a discussion with your investors at all?

DAYTON: Absolutely. I think one of the key things to keep in mind here is that we're not talking about a new substance, and we're - there's no panacea. There's no way to solve all the challenges of a particular substance. But one thing's for sure: a regulated environment with, you know, legal businesses is going to do a much better job of handling this product than the current criminal market. That's the first thought,

The second thought is I think we have a unique opportunity with the cannabis industry to not make the same mistakes that the pharmaceutical industry or the alcohol industry or the tobacco industry has made, because we haven't had a new industry like this really be birthed in the U.S. in a long time, and it's pretty rare for an industry to be like the cannabis industry, which, frankly, is begging to be regulated.

CHAKRABARTI: Looking into the future, Troy, do you see the marijuana or cannabis industry as one that becomes like coffee or like beer? Because a lot of people are talking about, hey, eventually someone is going to be the Anheuser-Busch of marijuana or the Starbucks of cannabis, that it will become a corporatized, commercial product in the United States.

DAYTON: Yeah. I think that really depends on consumer desires, and at least currently, the consumer desires - for the most part, when it comes to cannabis - are really built around a connoisseur culture. And that really does not lend itself to massive production and big national brands.

I think there's going to be people that try that. One of the silver linings to the fact that this is going to change slowly over a number of years is that it gives the little guy a chance, before the big multinationals come in and try to take over the industry. And they're going to have a really hard time doing that because they will have - yeah.

CHAKRABARTI: One would've said the same thing for mom-and-pop coffee shops before Starbucks comes in.

DAYTON: Sure. Sure, but...

CHAKRABARTI: And I have to say, though, the connoisseur culture that you're talking about, while true, doesn't also match, for example, all the young, teenage pot smokers who are out there, unless they, too, are connoisseurs.

DAYTON: Right. I think a key question to ask: Is would we rather have Starbucks, or would we rather have cartels and people slinging coffee on the side of the street and shooting each other over it?

CHAKRABARTI: Good question. Well, Troy Dayton is co-founder and CEO of The Arcview Group. He joined us today from Berkeley, California. Troy, thank you so much.

DAYTON: Thanks for having me.

CHAKRABARTI: You're listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.


Please follow our community rules when engaging in comment discussion on this site.
  • Chococat

    One issue related to legalizing pot, is the fact that many (most) employers drug test. Employers drug test before hiring and drug test after a work related accident. How does this factor into the discussion?

    • Kelley M

      The problem with testing for marijuana metabolites is that the presence of such does not confirm that an individual is under the u
      Influence at the time of the test.

      • Chococat

        I agree with you. Employers don’t care. If you use you lose. No job. Workplace drug policies are incongruent with the new marijuana laws, except in states where it’s against the law to discriminate in hiring for a candidate or employees’ use of legal substances (originally cigarettes and alcohol, now pot) such as WI. Where do the employers in CO stand regarding workplace drug policies? I don’t know.

        • Kelley M

          Most public sector jobs and jobs with safety issues usually refer to the fact that it is still illegal federally as a Schedule 1 drug, and therefore they find it a violation of law and terminate employment. I think you will start to see a lot of employment contracts having the question of marijuana use directly confronted. If you sign the contract, you are on notice and it is enforceable. Smoking cigarettes is legal, but certain industries bar such by contract with the employee, and termination has been upheld in every case I have seen, supported by the fact that a person voluntarily signed the contract and the fact that group insurance rates are negotiated based partially on whether there is a a no smoking clause in the employment contract since this affects the actuary evaluation of risk. The courts have cited directly to this when upholding termination.

      • RAOUL

        I believe your facts are in correct. I know many people in my line of work who have been tested for drugs, and marijuana was the culprit. They lost their good paying jobs because of it. Most of the time the tests produced a profusion of other drugs used with marijuana. In short, most likely these people were addicted to the product and were willing to take the chance they would not be tested. They are now unemployed and do not have the money to purchase the drug of choice.

    • RAOUL

      I know this topic well. I am a marine Pilot and Captain with an unlimited Ocean License. The question is this: Do you want a captain or officers of a cargo, passenger, or ferry ship, an airline pilot and crew, a person or persons operating cargo or passenger trains, a person driving your bus, or a doctor or nurse operating public transportation or medical practices respectively coming to work under the influence of marijuana before he or she begins the work day with you as a passenger or patient…. or operating his or her car after smoking a few joints?

      • Chococat

        No of course not. I agree with you. I don’t have a position…as an employment attorney I noted that drug policies prohibit drug use, even for sitting jobs/non-safety related. I’m referring to company policies that cover all at-will employees. To address Kelley’s point, at-will employees do not have employment contracts. Company policies are not negotiable. I just find it interesting. Some states allow employers to terminate or not hire someone for smoking tobacco (MI), where some don’t (WI). So perhaps this issue will be steered on a state-by-state basis.

      • Brian Kelly B Bizzle

        Legalizing Marijuana will not create an influx of impaired drivers our roads. It will not create an influx of professionals (doctors, pilots, bus drivers, etc..) stoned on the job either. This is a prohibitionist propaganda scare tactic.

        Truth: Responsible drivers don’t drive while intoxicated on any substance period! Irresponsible drivers are already on our roads, and they will drive while intoxicated regardless of their drug of choice’s legality. Therefore Legalizing Marijuana will have little to zero impact on the amount of stoned drivers on our roads.

        The same thing applies to people being high on the job. Responsible people do not go to work intoxicated, period. Regardless of their drug of choice’s legality.

  • Kelley M

    Mr Dayton believes people get into the business as a type of social activism or social disobedience? People get in the business to make money. If what Mr. Dayton says is true, pass a federal law legalizing weed, but require all sellers to be non profit, any benefit received goes to treatment centers, designated charities, and funding fir infrastructure and supporting the arts and education. That would truly be a revolution.

    • Kelley M

      The same revolutionary concept could require “grown in the USA” requirement. There are hundreds of massive buildings in the Midwest rust belt that are abandoned but would be perfect for inside hydroponic grows. This would also provide employment in areas that have lost massive amounts of jobs due to the collapse of the auto industry. In addition, they could require the use of renewable power sources at the sites such as wind and solar technologies. If they are going to create a new (legal) industry, this is the time to implement new ideas at the sane time. The non profit status would drive out big corporations and the employees who are working the industry could have substantial pay and profit share for their work.

  • RAOUL

    The analogy provided by Troy Dayton: “Would you rather have a coffee cartel selling coffee on the streets than at Starbucks” is absolutely stupid and illustrates one of the thousands of slogans provided by an illegal drug dealers now known as a respected entrepreneur?!? Whenever I purchase a cup of coffee at Starbucks or have a coffee at home, for sure when I get into my car to drive to work or on an errand I will not be buzzed out and mellow who can’t control his vehicle. Drugs and Alcohol is about making huge amounts of money which erodes common and moral senses for the sake of money or the sound development of children because of the proliferation of drugs on the street or in the school yard. The truth of the matter is this: Mr. Dayton speaks well, but really he doe not care about the public including the children he harms through his arcane pitch for the legalization of marijuana. Basically Mr. Dayton is a drug dealer.

  • John Denver

    Legalize it. Don’t Criticize it.

    Stop arresting people and handing out permanent criminal records for consumption of a plant which is so much safer than perfectly legal alcohol.

  • Mark Wilson

    There isn’t one valid reason to continue the tremendous failure and waste of our tax dollars known as marijuana prohibition.

    Those who cry out to keep marijuana illegal do so based upon fear not facts.

  • malcolmkyle

    The French are bragging that they have an antidote to marijuana. It’s called Pregnenolone.

    Common side effects of Pregnenolone are over-stimulation and insomnia.

    Anger, anxiety and irritability have also been reported.

    Headaches might also occur with higher doses.

    Acne and Scalp hair loss can also occur if the hormone is used daily for a prolonged amount of time.

    There is a more dangerous side effect of pregnenolone that should be given consideration if you are contemplating the usage of it: heart palpitations. According to RaySahelian.com, pregnenolone has been known to cause irregular heart rhythms, even with low doses.

    The American Cancer Society also reports that pregnenolone has been known to cause liver problems. It is also suggested that the growth of hormone-responsive cancers such as breast and prostate cancer may occur as a result of the use of pregnenolone.

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