I thought Ezra and his editing crew did a very nice job (other than in their somewhat eccentric choice of an interviewee). The contrast with a typical cable show could hardly be sharper: Ezra doesn’t need to compete for airtime or to show off his knowledge. He asks questions designed to elicit substantive answers, and then mostly edits the questions out of the tape.
NCGatSmFcts says
Thanks for the transcript!!! Hurrah, hurrah.
Somehow I hadn't quite glommed onto all the cigarette smuggling. That's very interesting.
And that only heavy users make alcohol profitable? Wow. I knew the part about them drinking most of it, but not that if they weren't there, the companies would go bust. (Or would they just raise the price?) I find it hard to imagine a world with no one selling alcohol. Also, it seems like locally there are suddenly all these craft brewers. But what do I know?
No one asked and no one else cares, but I also like your outfit. I am very happy with this current style of tonal colors instead of the old world of blinding white shirts with dark suits. It hurt my eyes. This is much nicer. Even the button-down goes over nicer in color. Anyhoo.
peteralstone says
Some not-well-formed economic thoughts:
With respect to (paraphrasing) "big cannabis only makes money on heavy users," this seems to be in tension with the fact that you also think that those users will have the highest price discrimination. Shouldn't their use patterns drive the cost of the product they consume towards the marginal cost (or marginal cost plus tax), thus wiping out the profit margin? This is particularly true if the concentrates become dominant, which I would assume essentially are commodity products. I suppose a degree of marketing could convince someone that one is better than the other, but this seems like an even harder sell than the "bud light vs. miller lite" swill differentiation.
On the other hand, if casual users (like craft beer drinkers) are indeed less price sensitive then producers can offer boutique products to them at higher prices, beyond the marginal cost. What does a boutique concentrate look like (or taste like)? Maybe the heavy users provide baseline revenue and help build supply chains but it is the casual and more boutique users who would provide the margins? This would suggest the producers need both kinds of user to survive.
Maybe the real place profits will be made and lost (as usual) is in state-level tax rules that determine the allocation of retail prices to producers and the states, and also in the rules that determine the way marketing is allowed to be used. If concentrates are really the way things go, it becomes a tight commodity market and clever marketing (along with innovation in production methods) should be the only way turn profits.
rawecon says
On heavy users / big cannabis:
Just because prices are driven to marginal cost does not mean companies are not making profits. In calculating profits, it is average cost that matters. In general we expect average cost to be below marginal cost (ignoring the fixed cost of starting up, but those are sunk and should not be considered in calculating profit). One way to see this is to note that the major beer companies regularly make sizable profits. Also, Exxon is the second most profitable company in the world, and gas is priced very competitively.
On casual users / boutique cannabis:
Just because casual users are less price sensitive does not mean prices will float above marginal cost. To the extent that markets are competitive it doesn't matter if consumers are willing to pay more for a good. If your price is higher than marginal cost then I can come in and price below you and steal your customers. In competitive markets, prices are always near marginal cost regardless of how price sensitive the consumer is.
The exception to the rule is when producers can market a product that is in some sense unique. This is why Apple is the most profitable company in the world. As you point out, it's not clear what exactly a boutique concentrate would look like. Perhaps companies will develop proprietary blends of various strains which they can market as unique. In the end, I imagine this will play out very similarly to the beer market. There will be lots of boutique cannabis, with companies providing new strains and new blends, and perhaps even new methods of getting high. but it won't play a large role in the overall market.
TheHersch says
Excellent interview.
I love the set. Liquor bottles! A dual-floppy PC circa 1982!
TimDoublavey says
I believe that's an Apple ][
SteveDavenport says
It's fitting that my first experience with Vox project is with this interview. I loved it — even aside from the discussion, great lighting, music, etc. They're doing a great job of making policy watchable (in my opinion, more so than the Charlie Rose-style all-black background Reihan Salam used for his VICE interview a few months back). And, maybe more than anything, it's good to see Ezra asking the right questions.
RonGibson says
I enjoyed the hell out of this piece. They largely did a nice job neatening up the transcript, which is great for those of us who'd rather read than watch and listen. (I say "largely" because "which conveniently weighs just about one ounce" got rendered somewhat awkwardly as "which can easily weigh just about one ounce.")
I'm so used to reading polemic that it's bracing to read clear language like this.
EdWhitney says
Edibles are likely to arise as a significant problem as smoking of cannabis declines. The pharmacokinetics may be partly responsible because the need for absorption through the digestive tract delays the onset of action, and consumers who have not yet felt the psychoactive effects (and are unaware of the problem) may consume more edibles and experience toxic effects when absorption is complete.
There have been two deaths in Denver possibly linked to edibles in recent weeks. One involved an Egyptian exchange student who jumped off a balcony after eating some brownies and a second tragedy involved an apparently amiable and well-adjusted family man who ate some cannabis (possibly combined with some medication for back pain), became agitated and started to hallucinate about the end of the world. He took a gun from the family safe and asked his wife to shoot him; she called 911 and was shot in the head before the police arrived. (She was on the phone with 911 for 13 minutes and was still screaming for help when a single gunshot silenced her.) This was not an abusive husband who was violent in the past and was a time bomb waiting to explode. It was a one-off event likely linked to a toxic episode of something or a combination of somethings.
Absorption through the lungs, whether through smoking leaves or inhaling vapor, leads to a rapid onset of action and a better ability to titrate the user's total dose. Edibles are a different matter altogether. It is too early to draw conclusions from a small number of cases but legal cannabis is still very new.