Ep. 395: Governor John Hickenlooper

Cannabis Economy Podcast
Ep. 395: Governor John Hickenlooper

Ep. 395: Governor John Hickenlooper

Governor John Hickenlooper joins us and shares the complications with other legislators in passing recreational Cannabis use: “With other governors, when they hadn’t passed legislation to legalize recreational marijuana, I have historically always said, if it was up to me, I’d wait a couple more years and make sure the data on driving while high, some of these other things … We’re still trying to get good baselines. We don’t have good data. But I would push that.”

Transcript:

Seth Adler: Colorado governor, John Hickenlooper joins us. Welcome to Cannabis Economy. I'm you're host, Seth Adler. Download episodes on CannEconomy.com. That's two N's, and the word economy, have a lot going on there these days, along with the podcast. Governor Hickenlooper takes us through his evolution of thinking through the entire legalization in Colorado and what his actions were and how his mind changed. First a word for Wana Brands, and then Governor John Hickenlooper.
[inaudible 00:00:37] with Wana Brands. Nancy, consumer education.

Female: I think what is going to happen longer-term in this industry is that, in order to really grow the total pie, we need a lot more consumer education. People need to really understand more about cannabis, and they need to understand how to use it in a way that's effective and comfortable for them. We need to also educate medical professionals so that they can educate the folks who they're working with.

Seth Adler: Governor Hickenlooper, thank you so much for having me in. This is a conversation that I've been waiting a long time to have. So let's talk about today, right? As you make your way to the sunset, so to speak-

John H.: Riding off into the sunset.

Seth Adler: Indeed. How do you see cannabis legalization here as we make our way into 2019? How do you see it in Colorado? You've had a front row seat, if not you've had the gavel in hand.

John H.: I think I found my way into the ring.

Seth Adler: Indeed.

John H.: I think that we obviously made some mistakes in the beginning. I don't think we were quite ready for edibles. But the great things that we were most fearful of, like a large spike in teenage consumption or a lot of people driving while high, gigantic jumps in emergency room visits, if we saw them, they were short-lived. We look at it now, and the only real demographic where there's been an increase in consumption is seniors.

Seth Adler: Indeed.

John H.: Right? That's either Baby Boomers coming home to roost, or it's the aches and pains, the rheumatoid arthritis or whatever, that marijuana seems, in many cases, to be a preferable pain reliever compared to some of the opioids. There's nothing wrong with that.

Seth Adler: There's nothing wrong with that. There's nothing wrong with being pro business. I feel like that's a moniker that you're okay with.

John H.: Yeah, we're pro business. I think, again, to me, that the great experiment around marijuana wasn't so much pro business or anti business. Obviously, I think it regulates itself and it just will operate better as a business. We certainly worked repeatedly to try and support small businesses, because, I think, again, lots of small businesses are generally a healthier ecosystem than a few monopolies, big businesses. So within that, let's create a system of rules, and let's be fair within that system of rules. We've generally tried to favor small business over large businesses, but also have tried to make it as easy as possible.

Seth Adler: Colorado governor, John Hickenlooper joins us. Welcome to Cannabis Economy. I'm you're host, Seth Adler. Download episodes on CannEconomy.com. That's two N's, and the word economy, have a lot going on there these days, along with the podcast. Governor Hickenlooper takes us through his evolution of thinking through the entire legalization in Colorado and what his actions were and how his mind changed. First a word for Wana Brands, and then Governor John Hickenlooper.
[inaudible 00:00:37] with Wana Brands. Nancy, consumer education.

Female: I think what is going to happen longer-term in this industry is that, in order to really grow the total pie, we need a lot more consumer education. People need to really understand more about cannabis, and they need to understand how to use it in a way that's effective and comfortable for them. We need to also educate medical professionals so that they can educate the folks who they're working with.

Seth Adler: Governor Hickenlooper, thank you so much for having me in. This is a conversation that I've been waiting a long time to have. So let's talk about today, right? As you make your way to the sunset, so to speak-

John H.: Riding off into the sunset.

Seth Adler: Indeed. How do you see cannabis legalization here as we make our way into 2019? How do you see it in Colorado? You've had a front row seat, if not you've had the gavel in hand.

John H.: I think I found my way into the ring.

Seth Adler: Indeed.

John H.: I think that we obviously made some mistakes in the beginning. I don't think we were quite ready for edibles. But the great things that we were most fearful of, like a large spike in teenage consumption or a lot of people driving while high, gigantic jumps in emergency room visits, if we saw them, they were short-lived. We look at it now, and the only real demographic where there's been an increase in consumption is seniors.

Seth Adler: Indeed.

John H.: Right? That's either Baby Boomers coming home to roost, or it's the aches and pains, the rheumatoid arthritis or whatever, that marijuana seems, in many cases, to be a preferable pain reliever compared to some of the opioids. There's nothing wrong with that.

Seth Adler: There's nothing wrong with that. There's nothing wrong with being pro business. I feel like that's a moniker that you're okay with.

John H.: Yeah, we're pro business. I think, again, to me, that the great experiment around marijuana wasn't so much pro business or anti business. Obviously, I think it regulates itself and it just will operate better as a business. We certainly worked repeatedly to try and support small businesses, because, I think, again, lots of small businesses are generally a healthier ecosystem than a few monopolies, big businesses. So within that, let's create a system of rules, and let's be fair within that system of rules. We've generally tried to favor small business over large businesses, but also have tried to make it as easy as possible.

Seth Adler: As far as those small businesses are concerned, when you came in, you weren't necessarily a proponent of this idea, to start. But you did say, hey, the will of the people. I'm going to go ahead and execute this. You put together a task force with many small business folks on that task force. I've interviewed many of them, all the way back when. So we can see that in what you actually did, as far as the people that you placed there. What did you learn from that task force all the way back when, if you can remember?

John H.: Well, it was so interesting. As you point out, I opposed. You don't want to be in conflict with federal law. Again, the fears of a giant spike in teenage consumption ... So many of the brain scientists, the neurologists, really worry that kids with this high THC marijuana could lose a sliver of their long-term memory forever, right? Even with just infrequent consumption of this high-THC marijuana. So there's lots to worry about. But at the same time, I grew up in the '60s. I graduated from high school in 1970. We were fed a lot of rot. I don't know if you ever saw the movie, Reefer Madness.

Seth Adler: Surely.

John H.: That was what they distributed for me and my older brother's generation, and these are the fears of marijuana. Basically, there was no difference between marijuana and heroin in terms of how they presented it. Again, I had good reasons to oppose the initiative, but I will confess that there was part of me that wanted to see if you could make a system work. I thought that's what our role ... Because our citizens had so strongly supported this, 55 to 45, that we needed to do everything we could to see if it could work. If the people against any form of legalized marijuana were right, and that we created a system that was worse, more crime, more violence, more prison, then we'd find out. But I didn't want anyone to come back and say, well, Hickenlooper's against it, so he had his finger on the scale. I wanted to make sure that not just myself, but everybody we hired, from Andrew Friedman, our first marijuana czar, all the way through. Everybody was doing everything they could to see if it was possible to make a system that worked.

Seth Adler: Truly, a laboratory of democracy. That's what these states are supposed to be.

John H.: That's exactly what we said. This is a laboratory democracy, and we were going to be the most aggressive and, hopefully, the most careful of the laboratories technicians and scientists, that we wanted to make sure that we got the real facts. We tried to treat everything fairly and listen to all sides. My ex-wife was a Quaker. The Quakers believe that there's a process or a person involved in a dispute called a fair witness. That's someone who has no self-interest. They have no benefit from either side. But they come in and engage and listen to the facts and are an active participant in trying to resolve an issue. That fair witness is often very important in finding a resolution. I thought the state should be the fair witness here, that we should everybody involved, but we shouldn't be dependent upon tax revenues, that we shouldn't have a self-interest to the state. So we tried to make sure that all the tax revenue that came in was either used for the regulatory framework or was to accommodate and help compensate for the unintended consequences of more drug use.

Seth Adler: As opposed to, oh, great, we can take this and put it here, and now that we've got this-

John H.: Right. Or, yeah, we'll just use this money for affordable housing, or we'll use this money for transit, or we'll use this money for higher education, whatever. Government always has needs. That's just the nature of the creature. We didn't want that to be part of the decision-making process as to whether this was a good thing or a bad thing. We really wanted the state ... And I still believe this. I don't think the state ... We tax alcohol at a very high rate. We tax marijuana at a very high rate. It doesn't mean we should be promoting it. If people want to relax and have a drink after work, this is a free country. They should have that right. Now at least in Colorado, if they want to come home and they want to get high with pot, that's their free right as well. But I don't think the state should be encouraging it so that they get more tax revenue. We've been very specific about that all the way along.

Seth Adler: That's an interesting nuance, which I hope we can come back to. As far as law being law, you already pointed out that it still is, to this day, federally illegal. So you might remember such folks as David Ogden and, my friend, Jim Cole.

John H.: Yes.

Seth Adler: So please give us a sense of what role you played and essentially what happened with each of those members, first the Ogden memo.

John H.: Well, I think it instructive to look at the entire sequence. What the Department of Justice was saying was that we're against this. We think it's a bad idea. But as long as you keep yourselves ... restrain your businesses to within certain guardrails, we have other priorities. Each memo was essentially saying the same thing in succession. We could never get ... And we wanted so much to get to the point where they would allow us to do banking. That's still in front of Congress. That was still one of my major concerns. You don't want to have a system where everything's in cash. If you're trying to design a system that would be given to corruption and gangs, what would you do? You'd say, well, first thing, let's make it all cash, and so no one can trace where the money's going and where it's coming from. I mean, that's just lunacy.

Seth Adler: But that third Cole memo was released in tandem with [inaudible 00:09:29]. Is that not treasury telling banks, please, go ahead and bank?

John H.: It depends on who you're talking to.

Seth Adler: Not if you're talking to the banks, I guess.

John H.: The banks looked at that. We interpreted it that way. But the banks looked at that and said there's nothing in here that safeguards our charter. I'm sympathetic. I didn't really understand. If the federal government comes in and revokes the charter for your bank, you're done.

Seth Adler: Yeah, that's it.

John H.: That's it. You're out. It disrupts your business. Even you can appeal and do all these things. You'll be done. They will not take any risk, which is not to say that there aren't some smaller banks and newer banks that don't have so much accrued capital. The value of their asset as a business isn't at such a high level that they can't take the risk. So we have had a number of smaller banks and credit unions who have been willing to bank the marijuana business, but they still can't use credit cards. I mean, still ... I don't know. Hopefully, we'll get some sanity into this system as more and more states ...
I've had a couple of governors call me this week. They're saying, I'm considering. What do you think, yes or no? I've always said wait and get more data. We're going to sit down and have a meeting over the holidays and really try as a team to come to where we can see whether we can begin recommending, yeah, this is a good idea. I think you should do it.

Seth Adler: Podcast land knows no time, so we're going to come out with this right after the holidays, because we don't want this to disappear into the ether, governor. I wonder what you think before that meeting, meaning, when folks have called you from other states, other countries ... I'm thinking perhaps of Canada and others ... what have you felt comfortable to share? Yes, wait on the data in your jurisdiction, but here's what I can tell you from my point of view.

John H.: Especially those places where the voters have already approved it, or the government in power, in the case of Canada. I went to California. I met with the general assembly. I met with Governor Brown. I told them all the mistakes we made, tried to lay it out, told them what I thought would be ways they could take advantage of the mistakes we made and start out at a better place. I think in the process of doing that, we served some purpose. With other governors, when they hadn't passed legislation to legalize recreational marijuana, I have historically always said, if it was up to me, I'd wait a couple more years and make sure the data on driving while high, some of these other things ... We're still trying to get good baselines. We don't have good data. But I would push that.

Seth Adler: If it was up to you, not the voters, is what you're saying?

John H.: Right, exactly.

Seth Adler: Because voters outweigh you, I think is what I'm hearing from you.

John H.: Of course. The voters ... That was exactly the point. The voter should have that final say, but the other governors were asking, should I promote this? Is this something I should support?

Seth Adler: I see.

John H.: I think that's where you get into the point of it does ... I will say it looks increasingly more and more like this is going to be a better system than the one we had, again, within that context of we don't have all the measurements. But every month it goes by, it feels more likely that we will see a system that's significantly better than the old system.

Seth Adler: Meaning without legal cannabis? Is that what you're saying?

John H.: Yeah. So before we had legal cannabis, we sent millions of kids to prison. We gave them felonies that made their lives indisputably harder. Most of these kids were kids of color. It just created many more challenges for their life. We didn't end the consumption of marijuana. I mean, it was still so inexpensive that ... Before it got legalized, I was interviewing a high school kid and saying, "Do you think this would mean more kids would do it or less?" He says, "Well, you mean because adults legalize it for themselves?" I said, "Well, yeah, I guess." He goes, "Listen, if I want to get pot, for 10 bucks I can spend a whole weekend high." This isn't something that's hard to come by. It's in common use. It's the common currency of how ... "It's as widely used as beer," is what he said, which I'm not sure is quite true, but still.

Seth Adler: You might have a word on that, and we'll get to that too maybe.

John H.: Well, but I think in terms of these kids, it really became how do we say to them that this is an awful system when they've already been using it? In a funny way, we haven't seen a spike in consumption. We haven't seen the things we feared. By all means, at least for adult consumption, it's part of our economy. People are paying taxes. There's a payroll. There's withholding taxes. It's all within the structure of how our society works.

Seth Adler: It seems like that prohibition thing doesn't work, and then when you do legalize it, people stop caring. So the teen use didn't spike because, well, it's legal, kind of towards what that kid was saying.

John H.: It's like liquor. We do everything we can to keep kids under 21 from drinking. We still ... I mean, if you want to look at what a much bigger health hazard is right now, it's binge drinking on college campuses. That's not just in Colorado; that's all across the country. So if we're really going to focus our efforts ... A researcher down in UCLA, I was talking to him a few weeks ago. He said that, in the year 2017, roughly 40,000 people died from the medical consequences of drinking, I mean, cirrhosis of the liver, alcohol poisoning. You go down the list, but that's how many people died. Not one person died from the medical consequences of marijuana. Now it doesn't mean that there aren't some people, especially young people, that have an inclination to bipolar disorder, and that when they smoke marijuana, it can put them into a permanent bipolar state, very, very hard to get them back.

Seth Adler: Needs to be worked done on schizophrenia and all.

John H.: Exactly, schizophrenia. So these are real issues, but in scale, the number of kids that have that response, it's a very, very small number.

Seth Adler: Major issues that still are in front of us are kind of what we do with taxation of legal cannabis and what that means to the illegal market, the illicit market. What I think we're learning is that, if you really spike up that taxation so that the metrics are uneven, the illicit market remains.

John H.: Right, you get a black market. There's no question. So we're one of the only states ... We lowered our taxes a couple years ago for that very reason, and we still have a black market here. We're going to look at exactly what the causes of that are, but I wouldn't be surprised if we didn't lower the taxes again, probably not a lot, but just a little bit. I think at that point, you begin to see, when you get into balance, it's just hard to imagine that that illicit market’s not going to go away. But we know it's ... I mean, some people think it's as high as $75 to $100 million a year in Colorado in a black market. But when people point that out, I say, "Yeah, but it used to be ... I mean, 10 years ago, it was $1.5 billion."

Seth Adler: There you go, exactly.

John H.: Now it's $100 million. Back then it was $1.5 billion. Is one better than the other?

Seth Adler: Well, certainly. So when you said 75, I thought that you were going to say that businesses are taxed at basically a 75% tax rate -

John H.: No.

Seth Adler: ... because of 280E.

John H.: Oh, 280E is, yeah, that's true. I think that what's interesting is, even when they're playing by 280E, they're still making a profit.

Seth Adler: These are pretty good business people aren't they?

John H.: Exactly. So I think in terms of dealing with the tax issues, maybe we shouldn't be lowering taxes; we should be fighting more aggressively to get 280E reformed so that they get the same deductions anybody else does.

Seth Adler: What comes with 280E reform would probably be a federal excise tax.

John H.: Absolutely. But it wouldn't be that ... I can't imagine it would be as burdensome as not being able to deduct any of your expenses.

Seth Adler: So we're starting to talk about standardization here. When folks talk to me about their new state coming online and we're going to go ahead and really do a ton of research and create our own regulations and start from scratch, I think to myself, well, why would you do that? We've got a pretty good state here, as far as Colorado. You mentioned very early on, as far as edibles, yes, there was work done to kind of go low, start low and go slow, and kind of educate and make sure that you turned that around. That was almost immediately, in retrospect. What are your thoughts when a new state comes online and then completely reinvents the wheel every single time, where there's only one issue ... And I'll tell you what it is in a minute ... with your Colorado regulations?

John H.: Yeah. It's hard to say. People say they're going to completely reinvent the wheel, but they're looking at Colorado. They're looking at Washington. They want to demonstrate that they're independent, and, in some ways, it's becoming more popular that they're trying to demonstrate that they're more pro marijuana. I think that's a new trend that we're beginning to see in certain states. Again, this should be the greatest good for the greatest number of people. One of the things I love about the National Governors Association is that we steal ideas from each other relentlessly. There's a whole institute of best practices that facilitates this. I call it enlightened larceny. When a state steals your best framework of regulation or your best ideas, they'll put smart people on it, and they will almost always improve it. Then you wait two years, and then you steal it back, and it's a better set of regulations, a better set of rules than you had in the first place. I think that, hopefully, is what's happening with marijuana.

Seth Adler: Is that what you see? Because I'll tell you, the one thing that specifically the business folks and I think your successor has it in his sights is the external investment into Colorado. Why did we hold firm on that, I wonder?

John H.: Well, we had strong messages coming out of the U.S. attorney's office that, if that passed, that they were going to look at marijuana in Colorado in a very different way. I will say the tone was very ominous, that they would have to make examples of certain businesses. The implication was that businesses would be closed. Again, I don't know how real that was, but I am a small business person by nature. When you have a whole industry and you know that they might make examples of a whole bunch of companies ... Usually, it's the little companies who don't have the money for a big legal fight. They're the ones who get picked off. So we felt that that was one part of it.
The second part is that that is almost always a consolidation process. When I talk to the little guys, the guys who only have four or five employees, they've got a grow house, maybe they're growing three or four hundred plants, got a little sales facility, they're pretty happy. I mean, I've met a whole ton of people that feel they're doing well. When I talk to the little guys, they all said we don't want that. At some point, we want to loosen up. But I think they felt it was ... One guy said it was an umbrella that kind of protected them from the elements, to allow them to get their roots, to get their roots as a business.
It's a little bit like ... I know you wanted to come back towards beer. But when we opened Wynkoop, it was the first brewpub in the Rocky Mountains, and there were a bunch of weird laws dating back to prohibition that made it very difficult to start a brewpub. Most of us, because it was so hard to get started and people didn't know what a brewpub was, they weren't sure they liked it, it took a few years to begin to get traction and not having a land race of everybody getting in the business all at once. Now there was a little rush. Once we got open and we did well ... We opened in '88, and I think in '91 about five brewpubs in and around Denver. We felt it. I mean, we weren't sustained.

Seth Adler: So this is through personal experience that you have this point of view.

John H.: Yeah, the sensibility towards the small business. Say, if they need an extra couple of years, I mean, this is going to be a long life. If we spend another two or three years and incubate the industries a little more and allow them to grow on their own, organically, I'm not sure I see the great harm. Anyway, I caught hell from it. People went nuts. How could you veto that? It passed by everybody. I mean, part of what we're seeing is we're seeing a very powerful lobby now. I mean, that grew so rapidly. Lobbies provide two interesting points of reference within the making of rules, the making of laws, in government. One is, almost always, they hire the experts. So they're people that are policy experts. Two though is they get paid when they succeed, and so they're not necessarily looking at what's great for the greatest number of people. They're looking at what's great for whoever's paying their contract, and usually, in this case, it's the people growing and selling marijuana.

Seth Adler: Interesting how times have changed. I'm starting to get the hook. So I've got three final questions, but you touched on something very early on. I just want to make sure that I understand what you meant. You said that governance and politics are two different things.

John H.: Well, governance is about efficiency and making sure that you are effective in what you try to do. Politics is really about the debate of what is the best direction, and then how do you persuade people once you've figured out what you think the best direction is. How do you get people to really come around to your side so that decisions aren't made that ultimately are not in the best interest of the community? So that's the politics side. But governance, generally, is here what we've done. We've all agreed to it. Here are the laws. Now let's make sure we don't have a bunch of red tape. Now let's make sure we don't waste people's time and money.

Seth Adler: Three final questions, I'll tell you what they are. I'll ask you them in order. What's most surprised you in cannabis? What's most surprised you in life? On the soundtrack of your life, one track, one song that's going to be on there? But first things first, what has most surprised you in cannabis?

John H.: So how rapidly how people got into edibles and how powerful edibles were, and we should have seen it, because nobody wants to inhale something into their lungs. No one's fools anymore. Especially when people are smoking pot to get high, they inhale, and then they hold their breath. So whatever particulates or whatever tar is in there is going to get into your alveoli, into your lungs a little more deeply. So that was a big surprise is that the edibles ... It shouldn't have been. We should have recognized that people would automatically begin to migrate more towards edibles.

Seth Adler: Well, sure. I take your point. But in the history of time up until 2014, it turned into a different market than it ever was.

John H.: Exactly, it was transformative.

Seth Adler: Absolutely. What most surprised you in life?

John H.: What surprised me more than anything is the variety of people that you meet and that, if you give people a chance, generally, almost everyone is a good person at heart. You sometimes have to ask a lot of questions, and you have to do a lot of forgiving sometimes, because people act impulsively, impetuously, and sometimes cruelly. But if you're able to forgive, it's amazing the number of people that I've gotten incredibly crosswise with and who have ended up becoming good friends.

Seth Adler: There you go. Some of my best friends I don't like that much, you know?

John H.: Well, Lincoln used to say, "Don't I conquer my enemy when I'm making my friend?"

Seth Adler: There we go.

John H.: That's the other side of that.

Seth Adler: That's it. On the soundtrack of your life, one track, one song that's got to be on there?

John H.: One of my staff members said it should be Get Yer Ya-Ya's Out! This came up a few weeks ago. That's the Rolling Stones if you're keeping score at home. I think there's a Colorado band that ... Actually, Ryan Tedder now lives in Los Angeles, but OneRepublic. They have a song called I Lived, and it was a song that Ryan Tedder wrote when his son was just born. It's a song just about taking risk and living life, drinking fully from the cup of life, and him telling his son what I really want you to do ... These are some of the great peak experiences that I had, and that's what I want most from you. I want you to have that same deep lust for life.

Seth Adler: That's a pretty good one. Governor, I very much appreciate your time. I look forward to checking in with you down the line. Who knows what you'll get yourself up to, right?

John H.: You never can tell. Thank you.

Seth Adler: There you have Governor John Hickenlooper, very much appreciate his time, very much appreciate your time. Stay tuned.

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Cannabis Economy is a real-time history of legal cannabis. We chronicle how personal and industry histories have combined to provide our current reality.