Big Weed (6 page)

It was as if we had returned to the days of
Reefer Madness.

Only later, when I was older and thinking about investing in marijuana as a business, did I learn how some very powerful people were suspected of having manipulated marijuana laws for their own benefit. After all, if marijuana was dangerous, then bureaucrats like Harry Anslinger were guaranteed government jobs for life. If marijuana was illegal, then law enforcement agencies had a new weapon for crushing those they regarded as undesirables—whether they were Mexicans, African Americans, or hippies. If marijuana had no medical use, then the burgeoning medical lobby could neatly eradicate a
cheap folk medicine from the American pharmacopoeia, paving the way for costly, lab-designed drugs. Media moguls such as William Randolph Hearst had a demon drug that would sell newspapers. And industry titans such as John D. Rockefeller, Andrew Mellon, and a host of other industrial manufacturers of the world could effectively wipe out hemp products—natural rope, fuel, fibers—from the American marketplace, leaving a void that would be taken over by products that could be sourced from their own petroleum-based products: nylon, gasoline, and oil. Huge lumber companies would provide wood from old-growth forests to create the kinds of products that the more sustainable plant, hemp, had once been used to manufacture.

This is the dark side of the anti-marijuana story. You'll find it all in the history books, if you know where to look, but to breathe it today in mixed political company is enough to get you branded as a conspiracy theorist, or worse.

My tutelage in the world of marijuana has never ended, and I learn more every day. The more I learned, I could see, too, that the business was promising but in dire need of optimization.

One thing I noticed right away was that most of the growers and dispensary owners I was meeting were marijuana lovers first and businesspeople second. This is highly typical in almost any small business. People think, “I like making leather goods—I'll open a leather shop.” “I like books—I'll open a bookshop.” “I'm a foodie with capital—let me open the restaurant of my dreams.”

And yeah, you can do that, but 50 percent of all businesses fail in the first two years, if not sooner, usually because the owner has enthusiasm and expertise in one area alone—and it's not making money.

Unfortunately, I was meeting many people who believed that all they had to do to make a killing in cannabis was rent a storefront, put
out a bunch of glass jars full of weed, and start hawking their wares to their friends.

To quote one: “All you need is a table and a bucket to sell weed.”

Some of these newcomers were rich kids who had the family money to set themselves up in a shop. Some were street dealers who were looking to go legit after a lifetime of criminal activity. Some had such a bare-bones approach to business that they leaped into the industry with nothing more than $10,000 in cash, a cheap sign, and a table.

What they lacked was the vision to see what this industry would become in the long term: America's newest consumer product. Its packaging, marketing, the public's perception, and its brand would all impact one's success.

Some people saw it, but most did not. Aside from the pang of munchies, they weren't all that hungry to grow to the next level. They weren't setting up their businesses efficiently. And they lacked a competitive drive.

As much as I enjoy marijuana, I love creating even more. Creating the vision I saw in my mind's eye would become an adventure from which I could not extricate myself. I didn't want to; I was falling in love.

I was also beginning to understand that growing marijuana was labor-intensive and costly. Nearly all marijuana in the United States—legal or otherwise—is grown indoors. (There are a few notable exceptions, such as California's Golden Triangle.) The early hippies grew indoors to evade the authorities, so the current wisdom on the subject is that marijuana is best grown indoors because you can control its environment and inputs. That's why it costs commercial growers like Jake as much as it does to grow one pound of usable marijuana.

Early on, as I went around town I was occasionally invited to visit other people's indoor warehouses—what people in the business simply call “grows”—it occurred to me that there had to be a better
way. But I was still too new to the business to try anything risky. I just needed to get into the business. I'd start small. I'd grow indoors. I'd learn the business from the ground up and then learn ways to innovate.

I also needed some venture capital. I had little of my own that I could sink into the business. I would need more.

My wife thought I was crazy. We had always been cut from a different cloth in that respect. She had an excellent job as a sports marketing executive. America's professional sports teams were lucky to have her pulling for them, believe me. But despite everything she'd seen me accomplish in my previous companies, she still believed that a career was all about landing a killer job. Her resistance to my legal marijuana concept eventually went from gentle to aggressive.

It didn't help that one day one of my daughters innocently inquired, “Daddy, why do you smell like lemons all the time?”

My first rule of parenting is never lie to your kids. So I sat all three of them down and told them all that I was thinking about entering the legal marijuana business. We talked about what marijuana was and why grown-ups would want to buy it. The different odors they smelled on my clothes—lemons, yes, but also pine, skunk, mango, blueberry, and so on—came from the plants I was spending so much time with. Basically, I patiently answered every single question they had until the questions dried up and they got bored of talking about how their daddy spent his day.

My wife had a lot of fears.

You have three daughters.

What if you end up arrested?

What if you end up bankrupt again?

And on and on.

Over the next four years, her worries only grew, even after the money started to flow.

On the other end of the spectrum were people like my mom. She had some concerns about my new venture, but she always wanted to
know more, to understand. She was open to the possibility that if the state said marijuana was legal, maybe, just maybe, this could be a huge opportunity.

When I wanted an open mind to bounce ideas off of, I went to talk to Mr. Pink. Most of the neighborhood congregated at his swimming pool during our off hours. His parties were some of my favorite memories, brimming with interesting people, camaraderie, and joy.

He and I would also meet for drinks at the Tavern Lowry in Denver and kick ideas around.

We saw eye to eye on a lot of things. You could tell by the questions he asked.

How much money do you think a start-up would cost?

What will you spend it on?

What would be the return?

How will you distribute?

What were strengths, weaknesses, opportunities, and threats of the business?

From the beginning, both of us grasped that the key to success in this business was growing the marijuana. By law, we were not yet required to be vertically integrated—that would come soon. But I knew the business model would work better if we were vertically integrated. We would then control not only the supply and the quality of the marijuana but also the packaging, branding, and point-of-sale marketing.

The biggest unknown, everyone thought, was that somehow the federal government would one day grow weary of the states legalizing marijuana, then descend on us all, seize our businesses and facilities, shut us down, arrest us, and hit us all with federal charges. That was definitely a worst-case scenario. It was a consideration, but it was extreme. I preferred to look on the bright side.

Landlords aren't going to be eager to have you rent from them, Mr. Pink said. You're looking at higher rent to make up for their risk. And the insurance will be higher too, I surmised.

The illegal drug business would not go away. Even in Denver I knew marijuana users who refused to get their legal red cards; they just didn't trust the system. They preferred to drive to their buddy's house and buy their weed the old-fashioned way, even if they had to patronize known drug dealers to do so.

Mr. Pink listened.

Whenever we talked about this at his home, his wife would be half listening to our discussion. She looked at me as if I were nuts. “Even if the state has voted for it, it's against federal law,” she would say.

“I'm just listening,” her husband said. And then he added absently, “That's the thing—it's not illegal anymore . . .”

“It's not,” I echoed.

We talked about it a few times, just kicking the idea around. Mr. Pink would get so passionate about the possibilities. Our conversations still ended with him saying
“We should do this!”

One week, I promised to meet him at the Tavern Lowry so we could talk over some of the numbers I had pulled together. Mr. Pink was already there when I arrived. I walked in with a spreadsheet I'd generated and laid it facedown on the table in front of me. We slowly gravitated from small talk to talking about the business. I ran through the numbers from memory, never deigning to flip over the spreadsheet. This is why I like business guys, or guys like Mr. Pink who spend their lives thinking about numbers. Mr. Pink could see that if what I was telling him was true, we could see a profit in six to twelve months. And we'd have the advantage of throwing ourselves into a business that was utterly, wonderfully new. That probably doesn't seem like a big deal, but it is. The rarest thing in the world is the growth industry. Some people know just how to maximize its potential. Other people sabotage their own chances of success.

“I want in,” he said suddenly. “If you put in the time, I could see putting in some of the money.”

We shook on it. Mr. Pink had to get going. It wasn't until he'd left that I realized that I'd never shown him my spreadsheet. It was as if the real numbers hadn't mattered. He trusted me enough to see where we were going.

A few days later, Mr. Pink opened a business checking account at a bank where he had some connections. And then proceeded to wire in $125,000.

We were unlike any of the other ganjapreneurs I had met. The former treasury agent and the tall, square-jawed businessman.

Congrats to us. We were drug dealers.

3

First Grow, First Blood

My weed wasn't going to grow itself.

I needed a grower. An expert. A master. Someone who could hit the ground running, help me buy and install equipment, and see me safely through my first harvest. Hopefully, this person would like working for me and want to stay on. He or she would want to grow with the business.

I needed expertise. Desperately. If you forced me to tell you all I knew about plants, I'd probably opine that plants came from seeds. You stuck a seed in dirt and watered it, and
voila!
—before you knew it, you had anything from a houseplant to a 50-foot banana tree growing out of your little clay pot. Hell, my front lawn was made of tiny little plants. I watered my lawn, and it grew and stayed green. How different could
that
grass be from the grass you smoked? I had no idea. I didn't take care of my lawn. Landscapers did.

So basically, I was clueless about the world of plants.

But I was
not
a stranger to hiring people. I'd done it before, countless times, for all my other companies. At my last firm, I had a person who screened applicants for us and flagged ones that merited a look.

Somehow, though, I didn't think a corporate headhunter was going to be of much help in
this
talent search. So one morning after breakfast I sat at my computer and cranked out a want ad that I planned to upload to Denver's Craigslist.

master grower for medical marijuana caregiver needed

I talked about the kind of business I was hoping to start, the kind of person I was looking for, and asked for respondents' experience and salary requirements.

Then I hit send.

The ad wormed its way into the world, took root in the world of the Internet, and in a few hours responses started bouncing back to my inbox.

I don't have to tell you what the Web is like. Some of the applications I received were well meaning and earnest but painfully illiterate. Some people were out-of-towners who had heard about Colorado's marijuana Green Rush and were eager to quit their jobs back home for a chance to get their foot in the door. Some openly admitted that they were not master growers, but they were willing to do anything to be involved in such an enterprise. One applicant told me he had tons of experience, but he'd recently spoken with his attorney, who advised him that he probably should only affiliate himself with a “legal, legitimate” business. (Good advice.) Another writer said he was hesitant to give me his resume, because, well, he had never had to do that before. He and several other applicants admitted that they'd been growing illegally for years and it was just a little weird to be talking about this via the Internet.

I got a few crackpots. Some treated me as if I'd dared to penetrate the hallowed world of marijuana geekdom that should only be trod by other longtime growers. If I was looking to
hire
a grower, then I was clearly not one of the initiated, and so why would anyone want to bother with me? One e-mail message became progressively more
belligerent as it waxed on in this vein. My correspondent closed by saying that I should not even think of tracing his IP address. He had blocked it with sophisticated technology.

Amid the hits and misses were reasonable, articulate folks who seemed like the sort I'd be interested in talking to. But even they had reached out to me with aliases and stubbornly refused to share their phone numbers.

Great, I thought. It's just my luck to be recruiting in a community of people who wanted to be hired but didn't want to reveal their identities. It was a slog getting them to phone me back. The ones I spoke to this way over the phone were exceedingly wary.

“Um, why do you want to hire a grower?” was a frequent question I got.

I'd explain that I was looking to enter the legal medical marijuana business in a big way. Mr. Pink and I were currently in the process of signing up every patient we could. Back then, all a medical marijuana patient needed to do was list our names as their caregivers on their application. We were offering every friend or family member we knew the opportunity to get their red card and asked them to assign us as their caregiver.

We were banking on a few things. We assumed that there were quite a few people in our social circle who already smoked and who routinely got their weed off the street. It would be no trouble to convert these people to our business. Why go through the hassle of patronizing an unsavory business when you could buy from a legit one? We also assumed that we knew lots of law-abiding people who had smoked in the past but who had never pursued marijuana beyond that adolescent phase because they were too nervous to deal with drug dealers. And we thought there were probably lots of people who were curious about marijuana but had never tried it for the same reason: They didn't want to break the law.

Years later, I'd have to say that these three demographics still accurately describe the types of people we see in our dispensaries:
current users, past users, curious never users. Well, our hunch was correct. We would ultimately enroll about three hundred patients. That told us that we were legally permitted by law to grow up to 1,800 marijuana plants. We would sell the product of that many plants to various dispensaries, theoretically satisfying the needs of our clients.

Typically, as soon as I explained all this, the conversation with prospective growers/employees would peter out. My callers didn't quite know what to ask. And then I found myself having to sell
them
on the opportunity.

“I think this could be a good job for someone who's thinking of going legit,” I said. “Who wants the hassle of funding their own operation?”

“Uh-huh.”

“So, what do you think?”

“Um, I dunno.”

Most of these calls went nowhere. I could hear the disembodied voices fading away over the phone. My sixth sense told me something was up. Was my frankness spooking people? Were marijuana growers so used to avoiding authority figures that they were essentially incapable of socially normal behavior?

I offered to meet my best candidates at a sandwich shop on Hampden in south Denver. It was near my home and central to Denver, easy to get to. I'd go down there to meet potential candidates in this comfortable space with black-and-white photos on the textured walls and wait for job seekers who never arrived. Maybe some of them peeked in, caught a glimpse of a six-foot-three, sandy-haired, clean-cut guy waiting for them at the back of the room, and immediately figured I was a cop.

I met three people in the sandwich shop, but none impressed me. They seemed too frenetic, too antsy, as if they thought this job possibility was just too good to be true and any moment the cops would bust in. One was a nice young man, twenty-seven years old, who had
just finished eight years in prison for growing in his home. He was busted one month before he was about to start college. He never got to go; instead he spent twice the normal span of college years in a federal prison because he'd done what I was working so hard to get into.

One day as I was waiting, in walked a man in his early thirties. He was about two doughnuts away from being perfectly round, and as he shuffled up to meet me, he was hiking up his pants.

“You Chris?” he said.

“Yeah, that's me.”

“I responded to your ad on Craigslist. I'm Adam.”

We sat. We talked. Adam struck me as a kind of passionate, Zen-like sloth. His movements were slow and deliberate, and when I asked him a question, his eyes would mull over the words and rove around the room as he gave it thoughtful consideration. Unlike the other people I'd met, he wasn't worried about a thing. He was calm as hell.

“How long have you been growing?” I asked.

“Fifteen years.”

That didn't compute. “Wait—how old are you again?”

“Thirty-one.”

“And you've been growing how long?”

“Fifteen years.”

“That means you've been growing since you were sixteen years old. How is that possible?”

He smiled. It turned out that he'd grown up in California, the son of a couple of hippies who grew weed for themselves every summer. He had helped his parents on and off over the years, then got into it on his own at age sixteen.

Mostly he was into welding, and dreamed of building for himself an underground grow facility out of old shipping containers. A place where he could disappear from the cares of the world and commune with his most excellent buds. That seemed a little extreme to me, but I would soon learn that some of the best growers were genuine
oddballs. Right then, the most important thing about Adam was that he'd been growing marijuana nearly half his life.

I'd found my grower.

My good friend Dax had been working hard to find suitable space for our grow operation. He had pulled some strings around town with other real estate broker friends of his who knew of commercial buildings for rent. He had helped me to locate a warehouse space that was just under 5,000 square feet.

Now, this was 2009, and most of the landlords around town were still reeling from the collapse of the housing bubble. A lot of businesses had gone under, and a lot of people had lost their shirts. The word around town was that landlords were desperate to lock in new tenants with long-term leases.

Well, apparently they weren't desperate enough to lock in
me.

The going rate for warehouse space was about $4 a square foot. But when we started approaching people, we found that all these spaces could be ours for a mere $12 a square foot.

In a “desperate” economy, landlords were perfectly happy to charge legal marijuana growers almost three times the going rate.

I had expected this. I wasn't surprised. That didn't mean I wasn't feeling bent about having to pay such a premium. Privately I started calling that premium “the vig,” which, in the criminal world, is the interest paid to a loan shark. In my world, the vig was the amount a legal cannabis grower paid above the going rate to get people with whom he did business comfortable with the risk of our industry.

Landlords accept a risk when they take on new tenants. They want someone who's going to be able to pay the rent on time for the length of the lease. If a tenant defaults, the landlord loses time finding another tenant. If a landlord has to retrofit the building, or undo what the last tenant has left behind in his wake, then the
landlord might actually be deeper in the hole than he or she originally was.

There wasn't a landlord in town who knew what to make of the legal marijuana business. Yes, they'd heard it was now legal to grow and sell this product, but everyone was aware that it was still federally illegal. What if the state law was repealed and the feds seized these commercial rental properties? To protect themselves, landlords
had
to charge more.

At least, that's how they saw it.

I had signed a lease on a handsome property on South Platte River Drive. You unlocked a street-facing gate and entered a nice courtyard trimmed with shrubs and about a dozen trees. This low-key elegance was costing me about $5,000 a month.