Doing the Cannabis Industry Right

Consider a career in the cannabis industry.

Me? Never!

Why not? You would be in good company. At the GSB, 71 students — members the Cannabis Business Club — are doing just that. But I didn’t go to business school to become a drug dealer! Neither did I. After seven years working for the International Committee of the Red Cross, I came to the GSB to get involved in social innovation. And that’s exactly why I want people like you to join the cannabis industry.

We founded the country’s first Cannabis Business Club to answer one question: what would it take to get the legal marijuana industry right? It’s a tough one. Then again, what better place to ask hard questions, than Stanford? I don’t have a simple formula to get it right. But I can recommend a simple tactic. Listen to the critics.

Let’s talk about why you might be hesitant to join. After a year-and-a-half of discussing this issue with dozens of people on campus, here are some of the most common concerns I have heard: Is it safe? Is it addictive? What about overdoses? What’s the danger of people driving stoned? And what about the children? These are important questions with which the industry has to grapple. If you’re asking them, you’re one of us.

I’ll add a few more concerns. Even though cannabis can now be legally purchased in 29 U.S. states and a handful of countries spanning every continent, there is still no uniformity in safety standards. Indoor cultivation can strain power grids, and has a large carbon footprint in some places. Physicians have access only to scant research on cannabis’s impact on health and wellness, and researchers cannot legally obtain the sort of cannabis that is available in any dispensary.

So I agree. There’s a lot of work to be done.

To guide the club’s programming, we identified three buckets of issues to explore. First and foremost, there’s regulation and compliance. Each new state to legalize — and every new country — is developing a distinct set of rules for how cannabis businesses operate. Unfortunately, the FDA cannot bring these frameworks into harmony, because the federal government still classifies cannabis as a Schedule I substance. Yet standards and regulations are important for any product intended for human consumption. In the absence of one standard, cannabis businesses navigate a complex patchwork of laws, in some places relying heavily on the judgment of their leaders.

Second, we look at effective and ethical business practice. Cannabis legalization is good for society if and only if the industry’s leaders manage to outcompete the black market while holding themselves to high moral standards. I think the argument for starving out the illegal drug trade speaks for itself. But moral standards and competition? This is where things get tricky. For example, if you serve a budget-conscious consumer, how do you drive up customer lifetime value? Assuming you don’t cut corners, do you encourage more frequent purchases, and therefore more frequent usage? Or maybe you up-sell to larger quantities, and thus higher average dosage? To be sure, you’ll want a good understanding of the health implications of any option you consider.

Finally, we consider questions of social and environmental responsibility. Businesses in the cannabis industry must view themselves as part of — not apart from — mainstream society. The enforcement of marijuana laws has had a disproportionate impact on people of color. These communities are today in the weakest position to benefit from the economic opportunity presented by legalization. Separately, demand for high quality cannabis encourages the expansion of energy-intensive indoor growing facilities. As the industry grows, it has the chance to get social inclusion and environmental stewardship right from the start.

Stanford alums are already working hard to address some of these issues. Tim Hade at Scale Microgrid Solutions is relieving the burden on the grid by giving cannabis growers access to cheap clean energy to power their production facilities. Steve Albarran and Tony Lewis at Confident Cannabis are making it simple for cannabis producers to comply with lab testing standards, and making it easy to access test results online. And then there’s my classmate George Hodgin, who founded the Biopharmaceutical Research Company. He is solving cannabis researchers’ greatest frustration: access to cannabis of the same quality and consistency that medical marijuana patients use.

They will be successful because they share three attributes: a commitment to doing things right, a healthy appetite for risk, and the discipline to play the long game. If that sounds like you, then you should join us. The industry needs more good people.

And maybe, just maybe, you’ll reconsider that career in the cannabis industry.