Industry Cycles

I have been privileged and old enough to have watched industry cycles. Think of all of the ISPs back in the day, Mindspring, MSN, AOL, Yahoo, Earthlink, Excite, and of course, Google. It took time, but eventually, there is no doubt that Google is the clear winner.

Putting my investor hat on, it is rare to see a new business created when no one else in the world is doing it. I have been thinking about this since I saw Mark Pincus’s rant about how nothing is new. I have known Mark since he was 22 years old, and he is the same now as he was then, just wiser.

Each genre of new businesses built over the past thirty years has followed different business arcs. I like to think about climbing a mountain. It takes time to get to the first mesa, where everyone unpacks, takes a look around, and tries to figure out how to take everything that has been learned, repack (reshuffle), and hike up to the next mesa. On the next mesa, there might not be as many competitors; you might run out of money, and one company could be leading the charge. It doesn’t matter the industry, this is the nature of growth.

When I look at the landscape of the cannabis business in NYS, it is time to tighten up the industry. Not that the OCM is listening to me, but unless they force parts of NY that have chosen not to allow dispensaries there, most of Long Island, they should not give out any new licenses.

The numbers show that few will break even, not pay themselves salaries, while others are selling cannabis from a one-man shop, and some are profitable. Given the amount of money invested in these businesses and the oversight required, it will take years for certain shops to become profitable or pay back the capital they invested.

There needs to be a check in the market. Let’s push the industry to clarify its direction so we can become more powerful rather than spread out. Everyone in the industry is waiting for the bottom to fall out as stores begin to sell or close. We need to get to another mesa.