POTENT Ep. 3 Pt. II - Government Relations Insider on How the Cannabis Industry Can Work with Political Powers
Illustration by @max_gps
Potent Ep. 3 Pt II Info:
Partners Bryan Bergman, Wendy Heimann-Nunes, and Nick Rosenberg are back with Adam Spiker discussing cannabis regulation, taxation, retail outlets, and how immersive entertainment and out-of-home entertainment can help move the cannabis lifestyle and businesses forward in a positive way
Podcast Transcript:
BRYAN:
Hi everyone and welcome back to the LOOK.Legal POTENT podcast. We're here for part two of our interview with Adam Spiker, Spiker Rendon Consulting. If you haven't heard part one, please go get your popcorn and listen to our discussion and how it benefits the cannabis industry. And how Prop 64 and some of our other rules in California are a great test case for some of the things that have been going on around the country with out-of-home entertainment and cannabis consumption.
We're really excited to continue this conversation and we hope you're excited to listen.
WENDY:
The world that Nick and I come from is a storytelling world. Nick comes from more traditional entertainment, storytelling and music. I come from environmental storytelling. And I think that, to your point, Adam, people can't be all things to all people. And what I want to impress upon the listeners is that my industry is an industry of environmental storytellers that are really, really, really talented; by creating environments that are compelling and that are catered towards a specific audience. And I think that that's something that I'm really interested in helping facilitate when it comes to the retail sector, is helping to create environments that de-stigmatize and create more compelling, entertaining, less threatening experiences. So that again, the subversive ability to de-stigmatized an industry so that the politicians that you're talking to no longer fear some of those things. And so I think as the industry matures and more legalization happens, more dispensaries grow and put an emphasis on the consumer experience, which is what we're seeing. Our really talented clients are really, really doing beautiful jobs of looking at the total consumer experiencing... can experience from environmental to packaging and whatnot.
I think that that's going to help, because I think it's going to help just make the industry feel safer, more compelling, more entertaining, and more sector-based. Where you have older people that are going to certain places, where you have the cool people that are going to go to certain places, where you have veterans who are going to go to places. And I'm really hopeful that what we do on the entertainment and intellectual property side of the world can contribute to the efforts that are being undertaken in the purely cannabis sector. So Bryan, I know you had a couple things you wanted to talk about as well.
BRYAN::
Wendy, that's a major component of it and it makes jobs for people like me and for Adam, who's pushing this stuff, a lot easier when you're able to put together a package like that and show regulators and government officials that look at what this is going to be like. Here's proof of concept, this is what you're missing out on. That's definitely a major component of it and it's something that they need to be more aware of.
And going back to Nick's earlier point also, it's not just about branding and education. It's both. It's showing what Wendy's talking about and it's also there is a regulatory component that is appropriate. For instance, it's a little too extreme in my opinion, but it still really helps to affect that, that in California, for instance, a retailer cannot sell anything but cannabis and branded merchandise from the products. They can't sell these other types of substances or things like you're seeing in New York. And it's interesting that New York's allowing that right now, assuming you went into a regulated shop. And it's a question that is somewhere where states and local jurisdictions can help to address those kinds of issues in a more appropriate fashion.
But obviously some municipalities have been willing to come forward more than others, Adam, and I'd love to hear about how, in your experiences when you have a municipality that is bullish on cannabis, what impact does that have on their community and the businesses there? We've talked about how there doesn't seem to be a lot of the concerns really materializing. So what about in those cities that are embracing this? What are you seeing?
Adam:
To me, it's been overwhelmingly positive. You can't look at it from the standpoint of a world where every constituent in a city is like, "Gosh, I'm so glad there's a MedMen down the street." That's just impractical, not just with cannabis, but just the general divide out there. So having said that, when cities have embraced and opened up cannabis to their community, I don't see many examples of cities saying, "Damn, we shouldn't have done that. That was just a huge mistake." Not in the last five, six years. There are examples before that, before '64. I look at a city like Long Beach. You look at a city like Los Angeles where they did these half-assed, "We're going to recognize you, but we're not going to go all in and treat you like any other business."
But when cities do go all in and decide they're going to award licenses and treat a cannabis business like any other retail business in their community, I don't hear many examples of contempt for it or, "I wish we had that one back, we shouldn't have done that one." It's received very well. And again, I think the only issue in the broader sense, for cities that haven't done it or are afraid to expand a very exclusive licensing, is they see examples in the newspaper or in the game of word of mouth of bad situations, that I believe are not being classified properly as almost exclusively illegal businesses doing something wrong. Does that make sense?
BRYAN:
It absolutely does, yeah. For me, I'm also just looking at some of the issues we're having with our regulatory regime here in California, and we were talking a little bit about that outside of this podcast. And I think we're seeing a lot of problems with the industry right now for some limited retail opportunities, because not enough local jurisdictions are allowing retail outlets. And we've seen a real horrible problem of oversupply without an outlet to be able to get them to these legal market retailers, and that causes people to go to unregulated marketplaces to otherwise get cannabis instead of getting through the legal market because of this issue. So when we're specifically talking about lounges, Adam, or even event licenses and like that, how are we going to be able to educate these local jurisdictions and how can our listeners work with these cities, to figure out how to get them to be able to open up and change this situation so that there will be more opportunities for retail and event outlets, which includes consumption lounges?
Adam:
Well, I don't know. I like to think differently. So, I try to compare cannabis to other industries when I'm talking to folks. In your example you just mentioned, there's this ridiculous bottleneck of the supply chain for cannabis where there's a real restricted amount of retail, and it's screwing the whole supply chain, the legal supply chain. Well, I talk to folks about other supply chain industries, alcohol, potato chips. You typically have a limited amount of large box manufacturers, producers, and a limited amount of distributors with efficiency, scale and logistics going to thousands and thousands of different retail outlets, so that they can handle the 40 million potential customers in the state of California. Cannabis is ass-backwards. Right now we have thousands and thousands of licenses in cultivation, manufacturing, distribution, and we don't even have a thousand licenses in retail.
And so I like to try... The more you can relate, in my opinion, cannabis to other industries because the ship is sailed on whether you want cannabis in your community or not. And if we're all being honest, it goes back to our childhoods, the ship has sailed. If any one of us wanted weed back when we were teenagers, it was a phone call away, that ship has sailed. So, now it's about how do you want to deal with it? And so in my opinion, trying to relate cannabis to other industries that are accepted and established, and giving those examples is a good pathway to go down to try and address cities on what they should do. It takes a voluminous amount of people and the more the merrier, but when you get well-respected people or entertainment and things like that involved, going to say a city like Inglewood or Compton. They haven't regulated cannabis. Compton had a ballot measure, they had some attempts. You just think of if prominent people from that community organized and went to that city council and said, "Look, it's time. We're with you. Let's figure this out. Let's license it, regulate it locally, tax it and clean it up." They would do it in a snap of a finger.
BRYAN:
Yeah, I think that's a big part of it for sure. And one of the other things I think is really important is having other industries that are not just plant touching businesses, getting involved as well to help create this coalition effect. I think that's going to be really important as well.
So Adam, we have to figure out how we can help create this type of coalition effect. One of the ways you've talked about it in the past is maybe creating citizen initiated ballots, or the alternative way of working with a local government to try and get them to get an ordinance in effect. I know you've been down both avenues many times. Can you talk a little bit about your experiences and whether you find one method to be more effective than the other?
Adam:
So, I think the first thing is, obviously not all governments are created equal. Every local government, whether in California and Illinois, New York, is created differently. Their political makeup, their power structure, whether between a city administrator, law enforcement or the city council or supervisors; there's always those power struggles. You have to figure out what you're looking at, what you're dealing with. And it goes back to what I said earlier. If a local government has not allowed cannabis this many years in, whether in California or other states, they've just opted out, you have to understand and work with them on why they haven't and try to address them. And in my experience, normally a local government is looking for political cover to do it. They don't want to own it for those three reasons I mentioned earlier. They're afraid they're going to screw it up, they're afraid a large swath of their community is going to come after them, or they're afraid they can't get it done within their political body.
So yeah, to your question, I've done ballot measures. I will never ever do them with a community without talking to that community and trying to see if it helps push them over the top. If a majority of a community wants cannabis, but the minority is powerful and objecting, that's something I'm interested in. The will of the people is supposed to speak, is supposed to be the deciding factor, but a lot of times in government it isn't. Because you could have 25% of a community that has pretty deep pockets and they'll run a community and they'll run this issue. And so we will do ballot measures with input from a local body, on how many licenses or normally it's the amount of licenses and where you want to put them, sensitive uses things like that. But it's all intended to get to the end result of what the broader community wants, which is they want responsible legalization. I'm happy to expand on it, but hopefully that makes sense. That can apply absolutely anywhere. There is a two-tier system where the local government makes a determination on whether to opt in or opt out.
BRYAN:
It's really expensive though to do a citizen initiative, isn't it?
Adam:
It's expensive to see a citizen's initiative all the way through to the voters, a hundred percent. It's not expensive to file a citizen's initiative and to work on it. It just takes time and effort. But, we've seen examples where cannabis companies have just thrown a dart at the board and said, "I'm going to spend a couple hundred grand and I'm going to ram this down a city's throat." And they do it. That's just not something I believe in or want to do, but there's obviously a value proposition in doing that. "I want this market, it's near to me, it's critical to me, the city council won't deal with me or won't have even an adult conversation about it. Screw them. I'm just going to take it to the voters that I think want it." That's taking it to a very extreme level. I think you're going to see more of that. I don't believe in that. And Bryan, you and I have had this chat; in a state like California, a cannabis license is not a vested right like an alcohol license. These things renew each year. It does not make sense to go force yourself, in my opinion, on a city when they have the ability, or the state has the ability, to take that right away from you each year as you renew.
BRYAN:
Yeah, I think that's why it's important that even if you are going to do initiatives, you know what the temperature is locally and what the concerns are. And maybe you can just briefly talk to the other experiences of working with cities that are at least listening and how it is to do the ordinance process for me?
Adam:
Yeah, so I think once you get at least lukewarm interest, that usually stems from education, from letting them see positive examples of how it could work. Because in my opinion, you have to put yourself in the shoes of that elected official, or that city manager, or that city attorney or that city police chief. They want to keep their job. So it's easier to not deal with something that's considered volatile. You typically want to just stay in your lane and do your job. You don't want to take on the big issues that could hurt you. So with that in mind, you're always wanting to educate them on what their options are, what the benefits are, what good looks like. And if a city can get there on their own, amazing, that's the best way to do it. But if they can't, you do have the public process of just placing it in front of the voters and let them decide.
WENDY:
I want to go back to, Adam, when you were talking about coalition building because it really got me excited. And I'm the perpetual optimist and I'm not as... I haven't been through the slog like you and Bryan have. I'm new to thinking about this industry and my spirit's not beaten down yet. And what's really exciting to me is I've spent 30 years completely focused on experiences, that's the primary focus of my practice. Anyone in the ecosystem that creates environmental experiences is who I work with. And what I'm pretty excited about is Bryan, Nick and I, and our firm in general, because we're an integrated firm and we don't just do the licensing component, we handle all different aspects of our cannabis client's business. We have an opportunity to help them, first of all, increase their business opportunity by understanding the importance of the power of brand and storytelling, the power of the experience, starting from the minute someone sees their brand, engages in it and then experiences it.
What that means for my clients, who are not in the cannabis business but are in the business of creating these experiences, and then also just the intellectual property aspect of how things are named. Don't name things. We can help them understand how it impacts the industry if you choose a name that seems scary or too appealing to children, for example, that makes the general public afraid of the industry. We can help nudge them towards a more productive decision-making for the industry in general and for them. And I'm really excited about how the cross-pollination opportunities of the various things that we do at the firm can not only help our clients, but really can help move the ball for you. Because the more de-stigmatized it becomes, the safer it feels. The better experiences that people have, the easier it's going to be on your end.
And I do think... And Adam tell me what you think about, is it linear or do you anticipate a flashpoint where people will start, municipalities, politicians and whatnot, will start to have a fear of missing out because they see other municipalities really benefiting? Not just economically, but in job growth and also just a sense of community, which is also what my business builds, is we build community. So I'm interested in your thoughts about... Am I smoking something or do you see a non-linear flashpoint opportunity for there to be a point when things really shift, just like we did in other progressive moments?
Adam:
Yeah, I don't know if there's going to be that D-day moment of like, "Okay, we're all in, let's all just do this." I think it's somewhere in the middle. No government likes to be first on something typically, because that runs a very inherent risk that it was a mistake, and then people typically pay for mistakes in politics or in bureaucracy. So I think it's somewhere in the middle. There's so many deserts out there that are dry of cannabis legalization, whether in California or in other states, where in my belief, if you just do a pin prick in a jurisdiction and show what it can look like with support locally, and make a good example of a full-blown process and implementation and roll out an opening of cannabis. That resonates to the other jurisdictions around it because, "Oh wow, the city next to us or five miles away did it and it went well. See constituents, this isn't the boogeyman."
So I think of it that way, somewhere in the middle of your two goalposts. Yeah, that's the way I see it. I don't think there's going to be a flashpoint, but I also don't think we're going to have to go one at a time. We're seeing that to a sense. It's a slow rollout, but you see a local government open up, whether it's the city of LA or let's say the city of Pomona, I think is a nice example, out in the Inland Empire in California, they did a nice process. They identified a couple operators, they picked them, they've opened up, I don't even know if there was any litigation from the losers. It was pretty smooth. The ripple effect is other communities now around that saying, "Okay, yeah. Let's take a look at that. Let's take a look at that model, that ordinance and that process, and let's see if we can carbon copy it, for lack of better words, into our city because cannabis is already here and we want the revenue. We might as well try and own it and regulate it."
WENDY:
Yeah, that makes sense. And so I guess my final question is... Well maybe it's not a question as much as an offer. As you are continuing your advocacy work at every level, at the grassroots level, and then at the broader level, if you see an opportunity for folks in the entertainment community, in the experiential community, to make a difference for your efforts in any way, please let me know. Because I firmly believe that the safer people feel environmentally and in their communities with this industry, the easier it's going to be for you to do your job. And then the more you get done on your end, the more we can help clients in Nick's and my sector, really do business as ancillary businesses within cannabis. So it's symbiotic. So, my ask of you is just please continue to let us know what we can do on the non-cannabis front in this coalition building, to help you do your job with less friction and an easier path because all boats rise with the tide. Brian and Nick, I guess I'll let you guys wrap our session up with Adam who's been fantastic. Thank you.
NICK:
So I hear a couple things here, right? On the one hand, I think there seems to be an issue with the legal industry in terms of dealing with the not legal industry, for a variety of reasons. Like you were talking about reputationally, the existence of these producers, what have you. At the same time, I also hear that the regulation of the market has created a lot of inefficiency. So I guess the big question is, is regulation, governmental regulation at the state level let's say, for now because that's where we're at, is that a friend of the industry ultimately, or is that an obstacle?
Adam:
Yeah, boy, you saved a tough one for last. I would say this, I bet if you polled a lot of the legacy cannabis operators that were involved in the buildup and machination of say the medical law in California or the Prop 64... and I'll speak California and then we can go into other states. But if you polled them, I bet by and large they would say they would rather not have Prop 64 and go back to the old way at this point. Because if you think about it, there's no other example of an industry that is regulated as heavily as cannabis, that is taxed as heavily, that is limited in its exposure to the community, advertising, things like that. There's no other example of another industry that exists in the country, where almost six years in in California, the estimates are 70% or 80% of the state is still dominated by illicit activity. It does not exist. There's no other parallel to it. To say it's unfortunate, is putting it mildly.
But I like to use this example. Say you want to go to your local 7-Eleven and get a six-pack of beer and it's, I don't know, 12 bucks. There could be 250% tax on that local state, federal, I'm just throwing numbers out. And you pay it, but you can't go down the street a block or two to five alternative unregulated liquor stores and buy an alternative for four bucks. It doesn't exist. There's not a corollary to regulated cannabis, in my opinion, in another industry.
NICK:
It's like prohibition is going on at the same time as the end of prohibition. You have a prohibition area industry and a legitimate industry operating simultaneously. Right?
Adam:
Yeah. Well, it's one foot in one foot out, in perpetuity. With prohibition, federal government lifted it. And I always like to ask people... We can go through this exercise. So I think it was... I want to say it was 1932, they lifted prohibition federally. And I like asking people, that first year what the federal tax was on alcohol? Give you guys all a guess. Bryan's probably heard me say this before, but I went and researched it because I thought it was fascinating.
NICK:
Zero.
Adam:
What do you think the first federal tax was?
NICK:
Zero.
BRYAN:
Zero.
Adam:
Wendy?
WENDY:
My gosh. First federal tax after prohibition?
Adam:
Yep.
WENDY:
I don't know, 2%, no 4%?
Adam:
Oh, you almost had it. It was 2%. The reason I say that is, they made a decision and they went all in on getting rid of the illicit alcohol industry. And they just said, "You know what? We're just doing this." Get into the regulated market. We haven't done that on cannabis by and large.
NICK:
No.
Adam:
Especially in states like California where we had the 1996 compassionate use, that we haven't done it. We have not created a bridge for the prior accepted medical industry to enter the regulated, taxed and licensed industry. Everything we've done has been half-assed and one foot in, one foot out. Case in point, we have these states doing it and they have to have their own ecosystem. And Bryan can speak to it more articulately than I can legally, but they all had to have their own local ecosystem within their state in order for the feds to stay away. And we still have no federal guidance on whether this is a tolerated industry or not; tax ramifications, you name it. And it's created a real problem. There is no other industry that is trying to be accepted, or being accepted, that is being treated the way cannabis is being treated. Period.
NICK:
It's insane. In DC, since I'm in the DC area, which is a jurisdiction that's controlled by the federal government, you have a situation where it was decriminalized. In this bizarre world where you can go into a store and you pay $65 for a baseball card, and then they give you marijuana because you're not allowed to buy or sell it. Literally.
Adam:
Yeah.
NICK:
And it is starting to become... The residents are starting to get annoyed because these shops are popping up everywhere. The delivery services are everywhere. It makes no sense.
BRYAN:
Yeah, it's why there's so much to talk about and why it's so fun to be having these discussions, because at the end of the day there's still a lot to do. But this is why we have these types of podcasts, it's so that we can learn more about what is still needing to be done. The future is bright, but we're in that time of change right now.
So yeah. Adam, my last final question to you here is, we've really got to thank the people that have come before and have fought so hard to get to where we are today. It's really been a long journey for them and it's been really difficult, and if not for them we wouldn't be here. And they deserve their place that they have carved for themselves. There's no question. But for those that are listening that haven't necessarily jumped in yet, especially people in Nick and Wendy's world who are just now starting to see this, there's something of an advantage, I feel, to trying to come now and not be a first adopter. Could you maybe speak a little bit to what it's like for newer businesses or other ancillary opportunities that are now starting to look at this industry as we're finally starting to mature?
Adam:
I think in states like California and there's definitely others, the reward for being a trendsetter and a legacy operator, and someone trying to fight for them to be treated like any other industry, has been, overwhelmingly, pain. I don't know many businesses that are actually doing well or doing how they intended to do post legalization. And so the contrast to that, is for those that are looking at entering the market, this thing is going to correct. And we're seeing examples of that all over the country. And so if you're new to cannabis or interested in getting into it, the unfortunate yet fortunate thing is you don't have that hanging around your neck, the pain and suffering and losses dealing with cities, counties, states, trying to figure out how the hell to legalize you. You haven't dealt with that. So you can come in with a blank slate and a good team and a good operation, and you have a very clear, distinct competitive advantage against those that have been in the trenches for 10, 15, 20 years.
WENDY:
Well, that's really good to hear. Because again, I'm the perpetual optimist, and being new to the industry, my gut has told me there is opportunity. And so it's really encouraging to hear you say that. And I think the best thing we can do is do it in a way that honors the people who fought the hard battle for all these years and not exclude them. In my mind, that would be really the way to go. If we could work collectively together and let the newcomers... Again, our firm is all boats rise with the tide. It would be great if we could do that. But I'm glad Adam, to hear that you feel newcomers are in a great position to seize opportunity. That's really super encouraging. Thank you.
Adam:
One last thing, Wendy. When you think of it, we're in a very industrial world these days. This is a multi, multi tens, probably going to end up being a hundred billion dollar a year industry. And the examples we've seen in the past of new industries created, are normally those carved out by the Elon Musks or Jeff Bezos or Zuckerberg for themselves. Right here is an opportunity where you can go out and get your piece of it. I don't know if we'll ever see that again. And I think that if you want to have a very positive takeaway to those interested, it's still unknown who's going to win and lose in the regulation and exploration of legalized cannabis in the United States. It's not determined yet. It's out there to grab.
BRYAN:
It's been really great having you on here, Adam. We really appreciate you taking the time with us today. It's been absolutely wonderful. And our listeners can find him on LinkedIn or at Spiker Rendon, that's S-P-I-K-E-R-R-E-N-D-O-N.com, and learn more from him directly about how he can help you guys put this coalition together and otherwise. Adam, we can't thank you enough. And from Bryan Bergman, Wendy Heimann and Nick Rosenberg, we just want to say thank you to our listeners for listening to another episode of LOOK.Legal's POTENT podcast. Thanks for [inaudible 00:29:59] listening.
Adam:
Thank you.