Ep. 409: Mitch Baruchowitz, Merida Capital

Cannabis Economy Podcast
Ep. 409: Mitch Baruchowitz, Merida Capital

Ep. 409: Mitch Baruchowitz, Merida Capital

Mitch Baruchowitz joins us with a brisk-paced narrative of his foray into the world of cannabis, with the same velocity and passion he has found in the innovations of the industry. He touches on a range of topics including investment strategies, tragic events with unexpected influence, misconceptions about legality and regulation of cannabis, organizational differences between states, and the future of the business as he sees it.




Seth Adler: Mitch Baruchowitz joins us. Welcome to Cannabis Economy. I'm your host, Seth Adler. Download episodes on canneconomy.com or wherever you currently get your podcasts. First, a word from Nicole Smith and Evolab, and then Mitch Baruchowitz.

Nicole Smith: Licensing is just problematic. Generally, you're sharing your IP in a variety of different locations and trying to replicate manufacturing across multiple states, and it's just intensely problematic, not only for the company that's trying to license, but also for the licensee. It just really became difficult to figure out the right way to do that, protect intellectual property and all of those sorts of challenges that come along with it. What we decided was easier was to develop an infrastructure where we can produce our formulations without THC and make them available to everyone.

Mitch B.: But cannabis.

Seth Adler: Yeah. I guess that's why we're here, Mitch.

Mitch B.: Yeah, so ...

Seth Adler: How do you pronounce the last name?

Mitch B.: Baruchowitz.

Seth Adler: It's very Jewish, let's be honest.

Mitch B.: Yeah. Well, between that and Merida, people pronounce ... Oh, people see me coming a mile away. People start speaking Hebrew to me, usually.

Seth Adler: That's fantastic.

Mitch B.: I'm like, "No [Spanish 00:01:03]."

Seth Adler: Right, and then they don't understand that because you're speaking German. No, that's Spanish.

Mitch B.: I'm speaking fast enough that they're not sure what language I'm speaking.

Seth Adler: Yeah, that's the other thing is you apologized to me earlier for speaking so quickly. We had a phone call even, and you're like, "I speak so fast, I won't ..." For me, my ears, this sounds correct.

Mitch B.: Here's why that's going to be funny. My brother is a Brooklynite, and he calls something, I had never heard of it until like two weeks ago, called the humble brag, which is this fake humility that people have while they're bragging. As a brother, he could say that to me knowing that he's my older brother. My mom got remarried when I was very young, and because of that, maybe, my stepfather's a wonderful ... They've been married for 35 years or more.

Seth Adler: Oh, for a long time, yeah.

Mitch B.: Yeah. Yeah, well, when I was really young. My biological father kind of disappeared, and so my brother was a key element of shaping my childhood, so I listen to him in all things.

Seth Adler: Got is. He's almost fatherly, is what-

Mitch B.: Even though he's only two years older.

Seth Adler: Got it, yeah.

Mitch B.: He tolerated, in the driveway basketball games, that when it was game point that I would foul him til I almost won, you know?

Seth Adler: Sure.

Mitch B.: He could never get a shot off because I was just fouling like crazy, so just an amazing older brother. He's like, "You know, Mitch, you've mastered the humble brag," which I had never heard of but I got a big kick out of. It's the way to be humble while bragging. I think, over time, I've developed because, in this space, we talk to a lot of people.

Seth Adler: This capital space or this cannabis?

Mitch B.: Cannabis and capital combined. You talk to people who may not have the background in finance or the background in structure, and so it's a speed and also content, and both combined probably make it very difficult to get their head around. If you're explaining a capital structure for something, and they have no idea what you're talking about, and you're doing it very fast, and they're from Missouri, they're going to look at you, and they're going to go back and say, "I need the replay."

Seth Adler: Mitch Baruchowitz joins us. Welcome to Cannabis Economy. I'm your host, Seth Adler. Download episodes on canneconomy.com or wherever you currently get your podcasts. First, a word from Nicole Smith and Evolab, and then Mitch Baruchowitz.

Nicole Smith: Licensing is just problematic. Generally, you're sharing your IP in a variety of different locations and trying to replicate manufacturing across multiple states, and it's just intensely problematic, not only for the company that's trying to license, but also for the licensee. It just really became difficult to figure out the right way to do that, protect intellectual property and all of those sorts of challenges that come along with it. What we decided was easier was to develop an infrastructure where we can produce our formulations without THC and make them available to everyone.

Mitch B.: But cannabis.

Seth Adler: Yeah. I guess that's why we're here, Mitch.

Mitch B.: Yeah, so ...

Seth Adler: How do you pronounce the last name?

Mitch B.: Baruchowitz.

Seth Adler: It's very Jewish, let's be honest.

Mitch B.: Yeah. Well, between that and Merida, people pronounce ... Oh, people see me coming a mile away. People start speaking Hebrew to me, usually.

Seth Adler: That's fantastic.

Mitch B.: I'm like, "No [Spanish 00:01:03]."

Seth Adler: Right, and then they don't understand that because you're speaking German. No, that's Spanish.

Mitch B.: I'm speaking fast enough that they're not sure what language I'm speaking.

Seth Adler: Yeah, that's the other thing is you apologized to me earlier for speaking so quickly. We had a phone call even, and you're like, "I speak so fast, I won't ..." For me, my ears, this sounds correct.

Mitch B.: Here's why that's going to be funny. My brother is a Brooklynite, and he calls something, I had never heard of it until like two weeks ago, called the humble brag, which is this fake humility that people have while they're bragging. As a brother, he could say that to me knowing that he's my older brother. My mom got remarried when I was very young, and because of that, maybe, my stepfather's a wonderful ... They've been married for 35 years or more.

Seth Adler: Oh, for a long time, yeah.

Mitch B.: Yeah. Yeah, well, when I was really young. My biological father kind of disappeared, and so my brother was a key element of shaping my childhood, so I listen to him in all things.

Seth Adler: Got is. He's almost fatherly, is what-

Mitch B.: Even though he's only two years older.

Seth Adler: Got it, yeah.

Mitch B.: He tolerated, in the driveway basketball games, that when it was game point that I would foul him til I almost won, you know?

Seth Adler: Sure.

Mitch B.: He could never get a shot off because I was just fouling like crazy, so just an amazing older brother. He's like, "You know, Mitch, you've mastered the humble brag," which I had never heard of but I got a big kick out of. It's the way to be humble while bragging. I think, over time, I've developed because, in this space, we talk to a lot of people.

Seth Adler: This capital space or this cannabis?

Mitch B.: Cannabis and capital combined. You talk to people who may not have the background in finance or the background in structure, and so it's a speed and also content, and both combined probably make it very difficult to get their head around. If you're explaining a capital structure for something, and they have no idea what you're talking about, and you're doing it very fast, and they're from Missouri, they're going to look at you, and they're going to go back and say, "I need the replay."

Seth Adler: Yeah, they're also going to ask you to show them, right? The Show-Me state.

Mitch B.: Well, of course.

Seth Adler: You picked Missouri, so I have to-

Mitch B.: I did. It just happens to be a state where I was speaking to people because they're licensing.

Seth Adler: Indeed, they are.

Mitch B.: You have to slow down. I think, as I've learned to adjust, so the apology is a nice way of letting people say, "Yeah, you are talking a little fast. Can you slow down for me?"

Seth Adler: Yeah, bring it back. Yeah.

Mitch B.: Instead of people ... because, a lot of times, people will just ...

Seth Adler: Let you go.

Mitch B.: I've noticed, in life, and I try to be this way myself, you try to be polite, and so people won't often say, "You're speaking too fast. I don't understand what you're saying," because they just want to go along with it.

Seth Adler: I got you.

Mitch B.: I think that apology has been my reaction to people often telling me, the people that I care about, giving me feedback and being humble enough to listen to that feedback.

Seth Adler: See, for the podcast, what they can do is they can literally just play it slower.

Mitch B.: At 33.

Seth Adler: Yeah.

Mitch B.: I was going to say, if there's a record player, yeah, but we don't, so-

Seth Adler: You can. You can do half speed or one speed, whatever.

Mitch B.: Yeah, sure.

Seth Adler: When did you get into cannabis?

Mitch B.: I could say I always had a nontraditional background, but it really goes back to my day trading days. Right out of law school, my brother and one of my best friends were day trading. They were one of the early SOES bandits, which anyone in finance would know were the kind of guys who were playing between the spread and the bid offer spread before institutions had that technology available, so it was sort of a dislocating, disrupting factor, and I was wildly obsessed with it. I would go to their office downtown. They wanted to create a business in New York, and I don't think the law firm ... As people will probably see, the law firm background was not for me. Going to charging people per hour, it was just never really going to be ... although I love the law in theory.
As we were day trading, we had a business, three of us. We had 30-something employees, and my partner, Ethan Ruby, was just tragically hit by a car.

Seth Adler: Oh, no.

Mitch B.: While walking across Delancey Street.

Seth Adler: I'm sorry.

Mitch B.: As a pedestrian.

Seth Adler: So yeah.

Mitch B.: Yeah, hit by a Budget Rent-A-Car going through a red light. Through his recovery, he wanted to look at alternatives to opioids.

Seth Adler: Oh, he is alive. Okay.

Mitch B.: He's alive.

Seth Adler: All right.

Mitch B.: Yeah, no, no.

Seth Adler: Great.

Mitch B.: Yeah, he's alive. We were roommates. We were best friends. He moved out to Colorado to build a business that focused on research development in medical, very focused because of his own struggles.

Seth Adler: What year was this?

Mitch B.: This was, I want to say, '06, '07.

Seth Adler: Okay.

Mitch B.: So ...

Seth Adler: He couldn't have had any idea about cannabis, right, coming from New York.

Mitch B.: No, no, no. Oh, yeah. Well, he did-

Seth Adler: Well, the cannabis business.

Mitch B.: He went to U Penn, and he went to Brandeis for a year, we went together, and he transferred out. That's where we met.

Seth Adler: Got it.

Mitch B.: He knew plenty about cannabis, I'm sure, in the real world.

Seth Adler: Indeed.

Mitch B.: But not medical cannabis.

Seth Adler: There we go.

Mitch B.: Not stronger [crosstalk 00:05:41]-

Seth Adler: Us East Coasters, we didn't know what was going on.

Mitch B.: Industrial.

Seth Adler: Yep.

Mitch B.: Right. He went out there with another college friend of ours, and they started to build a business, but there was a non-residency component that was very ... let's call it a limiting factor, and so-

Seth Adler: Yep, still is.

Mitch B.: Still is. Still is, yeah. Thank you for pointing that out.

Seth Adler: Yeah.

Mitch B.: Oh, feel free to educate me on cannabis.

Seth Adler: Doesn't sound like you need it, but go on.

Mitch B.: Well, I appreciate that.

Seth Adler: Yeah, we got Governor Polis coming in, that's Governor-elect Polis coming in.

Mitch B.: Well, that's what makes good radio, I guess, right?

Seth Adler: There we go. Yes.

Mitch B.: Okay. Yeah, well, Governor Polis, who I've met at a Simplifya event, one of our portfolio companies, so another really smart guy, almost seems like a New Yorker, which Colorado-

Seth Adler: Well, that's because he's close-

Mitch B.: Colorado is the New York of the Midwest, maybe, instead of Chicago.

Seth Adler: Sure, yes.

Mitch B.: The deep Midwest. Let's call it the Rockies.

Seth Adler: There are qualifying factors of Mr. Polis that make it seem like he's a New Yorker.

Mitch B.: Sure, highly sophisticated, though.

Seth Adler: Indeed, absolutely.

Mitch B.: Yeah, so-

Seth Adler: Has a little bit of money.

Mitch B.: Feels like there's a little edge to him.

Seth Adler: Indeed.

Mitch B.: Yeah. A good edge, if you're listening, Governor Polis.

Seth Adler: Absolutely. Yes, of course.

Mitch B.: He was out there, and I mean we were always doing entrepreneurial things. We had a business together, and so he really wanted to focus on research. I think one of the things we discovered, as friends, is we weren't in business together, per se. We had done a bunch of stuff, invested together and were doing a bunch of stuff, but we had discovered that it was hard. The limiting factors of the non-residency were creating work-arounds that we felt very uncomfortable with, just I felt uncomfortable with, he had felt uncomfortable with, and he was looking deeply into how he could create a sustainable long-term investment structure for himself so that he could own ... There really was no answer. There was one lawyer out of New Jersey who was sending around these really high-yield loans, and it was crazy where the what I would call the stray voltage of institutional, quote, unquote, air quotes, institutional money hat was coming into Colorado.

Seth Adler: Did you say stray voltage?

Mitch B.: Yeah. That's what we-

Seth Adler: Can you define that, please?

Mitch B.: Yeah. That's a term we use for the white noise around an investment or ...

Seth Adler: Got it.

Mitch B.: Think of what stray voltage is in general. It goes in any direction and every direction, and you don't really know where it's going to go, and so we use that to describe the sort of ... whether it's the noise, the narrative that really isn't relevant to the core, but it's something you have to deal with to get to the core. If you can turn off stray voltage, then you get to the opportunity.

Seth Adler: There we go.

Mitch B.: Because you don't want to get shocked.

Seth Adler: There you go.

Mitch B.: Okay? Unless the opportunity's fantastic. Then, in that case, you grab that and you hold it til you-

Seth Adler: Just go, man.

Mitch B.: Til your teeth rattle. If you have a governance background, like I do, you learn how to ride that horse maybe too well. Over time, we just, through the conversations ... At that point, I was still the deputy general counsel of MarketAxess, a, at this point, $8-billion public company. I was working on Qs and Ks, Sarbanes-Oxley compliance, broker-dealer compliance for 200 registered reps, writing data licensing, so I was deeply involved in the substructure. At that time, I was also helping some startup technology companies in SoHo work on their go-to-market strategy and their patent filings for some of the patents that underpin the ad tech, relates to stuff that Facebook uses to this day.

Seth Adler: Yeah. I that three jobs that I'm counting at the same time?

Mitch B.: Well, when you work with your friends, it's not a job, right? You don't get paid, so it's really not a job.

Seth Adler: Got it.

Mitch B.: It depends on whether compensation is what a job is.

Seth Adler: Fair enough.

Mitch B.: It was a labor of love. I come from an entrepreneurial family either way so, as I said, we owned these businesses. Over time, what we started to realize is the evolution of Colorado looked like a real business was going to come, and so by '08, '09, early into 2010, I just, through my normal ... By then, I was now the general counsel of a huge broker-dealer, offices in nine cities and entities in several countries. Through that, I just had relationships everywhere, and so I'd run into a bunch of other people doing business in Colorado, but they were doing business for a long time. These were growers and ...

Seth Adler: With 1284, which came in in 2009, that changed things to be a regulated market.

Mitch B.: Remember, the Ogden memo is what really changed things, which was ... it basically gave patients comfort that they wouldn't be prosecuted for their usage.

Seth Adler: That's it.

Mitch B.: That really unlocked and-

Seth Adler: That's the precursor to the Cole memos.

Mitch B.: The precursor, right, right.

Seth Adler: That's right.

Mitch B.: Yeah. Everyone always talks about Cole, but you know the people who really have been in this for a long time talk about Ogden.

Seth Adler: Yeah, David Ogden.

Mitch B.: Yeah, David Ogden, right. Over time, we started to see this shift in patients. There was a stability that was starting to be developed because patients ... You knew that a medical patient who was using for MS or something was ... and my partner who was using it for spasmatic or phantom pain or whatever, that those people were not going to get prosecuted. So patient count. Whenever there's business opportunity, people in the United States are very nimble and now more sophisticated people.
Colorado's interesting because it has a very different historical context than California, which is more pioneering ethos, risk prosecution. Even one of the biggest companies out there, Harborside, one of the most successful operators in the entire space, tax issues, other things. They're real pioneers. They deserve a lot of credit.

Seth Adler: 100%.

Mitch B.: That is a much different market than Colorado. Colorado could-

Seth Adler: Oakland? Let me make sure I understand what you're saying.

Mitch B.: Harborside is Oakland, yes. Well, I don't just mean Oakland. I mean, look, in 2010, you could get a medical card in California on an electronic tool within 30 seconds. They'd probably have it delivered to your hotel or whatever as a nonresident. There was an infrastructure built in California that did not care about the illegality. It was a pioneering ethos. There were growers. They were innovating extractions. You could get 45 different kinds of extractions probably on Venice Beach in a tattoo shop while eating a brownie.
There was none of that in Colorado. Colorado always had a much more hierarchical approach, which is why it was ... Kudos to my friends. They always had that thought that Colorado is a great place to try to look at this pioneering ethos because it had California in it, but the people in Colorado, maybe because they came from tech ... There's a big tech industry there. Also, it was built much after California. California always felt ... there's always been this ethos of like, "Hey, we're on the ... Balboa finding the Pacific Ocean. We're on the end of the world over here."

Seth Adler: Yeah, yeah, and there's generations of folks that have been growing, actually, great cannabis for quite some time.

Mitch B.: It's interesting you say that. Recently, we held this what we call connectivity dinner in LA. We've done two of them so far. We're going to do two or three more where we get industry executives together just to make sure people are communicating, to drive discussion and catalyze a professionalism. We feel like people, as they know each other, will hold each other accountable to a standard of behavior that will elevate the whole industry. In LA, it was different.
We did one in New York, and it was financial people. Yeah, sure, some people came in that were ... It was along with [Cannaccord 00:12:17], so everyone was here for Cannacord, which was one of the first institutional conferences. In LA, it was operators because there's thousands of them, so the list got so filled so quickly. I mean, in New York, we had 65, 70 people. In LA, we had like 900 people asking to be on that list, and we could only have like 125. There's only so much room at the Sunset Marquis. The quality of people, it was the same quality, but the difference of operators ... You know what's interesting? A lot of the people-

Seth Adler: Size of business type of thing.

Mitch B.: Yeah, just people that have been doing the business for like 12 years whereas, in New York, it was more recent operators, more recent vintage, limited licenses, East Coast-West Coast, not Biggie-Tupac, but there is a difference. What was interesting to me was the conversations also. Guys who were running packaging businesses or, obviously, we own Kush Bottles, the public company, but ...

Seth Adler: Sure. Nick says hi, by the way.

Mitch B.: Yeah. I love Nick, love Nick, great, just, we think, a phenomenal operator and-

Seth Adler: Can you pronounce the last name?

Mitch B.: Kovacevich.

Seth Adler: See, I say Kovacevich.

Mitch B.: Yeah, well, you say it wrong, so not to insult the host.

Seth Adler: No, that's fine.

Mitch B.: Don't edit this to make me look bad now.

Seth Adler: No, of course not.

Mitch B.: But yeah.

Seth Adler: Yeah.

Mitch B.: At the end of the dinner, people had invited their friends. We had a sort of cocktail after and where people were just ... they had invited their friends who couldn't necessarily ... we didn't have room for. We were sitting there, and a guy was what we call movement people, and we mean that in a somewhat complimentary way. These are people who built it, right? This might be the people at the original MPP or people who don't get the credit that they deserve when [crosstalk 00:13:43]-

Seth Adler: Hallelujah.

Mitch B.: Yeah. It's true. Too many business operators who are newer vintage often don't give credit to the shoulders that they're standing on. I don't know why I feel the need to highlight this but, on Twitter, I often try to highlight just factual things that I think, governance-wise, but I'm often critical of companies, and the truth is all of these companies from Harborside down to MedMen down to ... it could be a company like ... I'm trying to think. Maybe it's Dosist, which used to be called Hmbldt, or I think it was, or maybe that's Ascend. The brands sometimes escape me, but the truth is these are people who were doing amazing product things. PAX Labs is an example. These are people who have done incredible things and don't get the credit for innovating and bringing a lot of opportunity because they kind of burnt the old fields so that new crops could be grown on those ashes.

Seth Adler: You're speaking figuratively.

Mitch B.: Figuratively speaking because, oh, unfortunately, I don't ... that's probably sensitive to people in California who figuratively and literally and really had to suffer, so ...

Seth Adler: Indeed.

Mitch B.: Someone came up to me at that, and this was a movement person who had been-

Seth Adler: Now we're back at the dinner in LA just for-

Mitch B.: Well, I'm getting back to ... See?

Seth Adler: Yeah.

Mitch B.: You don't have to get me back there. We'll get back there on our own.

Seth Adler: Oh, that's not where you were just going?

Mitch B.: I am going there.

Seth Adler: Okay, perfect, yeah.

Mitch B.: But I was getting there on my own.

Seth Adler: Okay.

Mitch B.: Yeah.

Seth Adler: For folks that are listening, they might not have kind of made the jumps with us.

Mitch B.: I'm going back to the point I'm going to make to your point about people who have been generationally skewed.

Seth Adler: There we go.

Mitch B.: And how the mindsets can clash and why there's real opportunity in this space because of that. This person came up to me and was ... we were talking. He had a friend of a friend of a friend who was there. He was like, "Oh, happy to meet you. Oh, you're investing." It was sort of like a natural sensitivity and maybe skepticism of like, "Oh, a professional investor from New York. This guy doesn't know anything." We get that a lot, probably less so now that people read and understand that we really ... I think Merida has proven as we have so much content out there that people ... You either can decide that we know what we're talking about or not, but there's enough content where you can make that decision before you ever even have a direct conversation with us, which I'm okay with, right? You can judge by ... it's the show me again.
He said, "You know, my family's been growing for like 65 years, the taxation ..." In their mind, and this happens a lot, the fact that it's regulated, they assume that regulation would actually mean that they would have an advantage because unregulated ... People almost think that regulated means unregulated or that legal means unregulated.

Seth Adler: We've been doing it forever, so the regulations will just make what we do legal, and that is-

Mitch B.: Yeah, in the way we do it, in the manner.

Seth Adler: In the way that we do it, and that is-

Mitch B.: In the taxation we do it.

Seth Adler: Absolutely not the way that it happens.

Mitch B.: I've been saying this for four or five years and, actually, my original partner in Connecticut so ... I'll get you back there as well. When I was speaking to this person recently, the thought of regulation or, I'm sorry, legality, meaning deregulated, is not right. For five years going back to an [inaudible 00:16:41] I went to or something where there was this sense that, as things got more legal, they would be easier or less regulated felt to me, coming from the regulated financial space and other things and also having won one of the four licenses in Connecticut where there were more regulators than growers, so it was going to be not just regulated but also implemented and validated, and the regulators were going to be on top of you, and there was going to be a deep regulation.
Those things come together, and so there was this sense of like, "Oh, my God, it's about to be anarchy when ..." The conversations Ethan and I would have with people is like, "No, actually, we've seen the future in Connecticut, and its not what you think. It's going to be highly regulated." That always informed my thinking on identifying the misconceptions that, at some point, would have a business thesis to how do you ... As people are wrong, what are the things they're going to need to get right?
Over time, as this Colorado ... as our friends started to really perform amazingly in Colorado, we started to develop sort of a little group of guys that we knew each other. I knew 50 other people operating in Colorado, so we made some connections there. One of those connections said to me, "Hey, I don't know if you've spoken to your friends, by Connecticut ... You live on the border of Connecticut. Do you know Connecticut is trying to pass this almost New Jersey-like?" New Jersey really deserves credit for being the first state to go real medical in a nonprofit way. No one gives it credit at all.

Seth Adler: No, well, but it's because-

Mitch B.: Well, the [crosstalk 00:18:09]-

Seth Adler: ... then-governor Christie kind of ... he put his foot on it.

Mitch B.: Right, exactly. Over time, Connecticut figured out a regime that could be highly regulated, and that's why they deserve a lot of credit. Bill [Rubinstein 00:18:21], who is an advisor to Merida, built that original program through the Department of Consumer Protection. Take a 10-page law, turn it into 50 pages of regulations, an application process, a scoring process, and all kinds of other things. It's one of the few states that's never had a lawsuit, per se, because of how transparent they tried to be about the scoring.
It was also early days before the political game. People didn't even know, so we decided to apply, very maybe naively. We didn't know the task we were taking on and spent months and months and months developing it and convincing these Colorado operators, these professionals, one of them being a friend of ours in Colorado, my brother's roommate at college, Dan. We convinced them all to come east. We built this thing and, instead of showing the regulators, like having an aspirational application, we just showed them, "Here's what our company looks like if we win." We scored first in the state by a mile.
At that point, you step back. My best friend who has these health challenges and is now going to be actually growing the medicine, researched, developed highly pharmaceutical clean rooms, jumpsuits that you look like the Intel fabrication facility. It was a really proud moment. We cried, actually, when we found out in ... We were in Vegas together at an [inaudible 00:19:38] or something. I don't remember what it was. He looked at me and said, "I'm going to tell you something. I swear to God, you better not say a word." He looked at me. I thought he was about to tell me the worst thing. You prepare your mind. I didn't know what he was going to tell me. I didn't even expect that we were going to get the decision this quickly. It was late January 2014, and he looks at me, and he goes, "We won." We had applied three months ago, four months ago. I forgot that this was coming. We just sat there, hugged and cried, and didn't really know what we had accomplished. Then you have to build a business. We realized, at that point-

Seth Adler: Then we got to actually do the thing.

Mitch B.: Yeah. We realized, at that point, that we now had this incredibly difficult task that no one had ever done before, which is a highly regulated, highly ... with rules that doesn't ... The people who wrote the rules didn't know how to grow cannabis, so you have this, again, this pioneering ethos that you have to recruit tools, stuff that doesn't even exist yet. Now we had 8 million in escrow or so, and we had to use that money, and we started spending building out this building in Watertown, Connecticut. Kudos to them. They've built an incredible business. We said, "Oh, this is great. We won't have to do another one of these applications for forever maybe." We don't know.
Within months, two months maybe, other states started to move, Minnesota, Illinois being the two that moved the quickest, and we started getting emails from everywhere. We got emails from Texas saying, "Hey, you guys finished first. I [FOIAed 00:21:11] your application," and so we called up the authorities and we go, "Uh, all right. We redacted our application. There was personal ... " Under FOIA, you can ... the names and ... but we were so naïve, we didn't redact 75% of it. Nowadays, you look at the New York, they're all posted on their site. It's like-

Seth Adler: Nothing.

Mitch B.: 5,000 pages of nothing and four pages of like, "We plan on applying for a license in New York," right? Then, actually, when you go through those, you actually discover some interesting information like you start to see who partnered up and lost because no one broadcasts a loss. Everyone in the world only talks about their wins. I say to people I've always failed forward. You're going to lose some and win some. This has become a full-out process. One of the reasons I founded Merida was to sort of get away from working your butt off to build a business for years and then losing and having to be a zero. That's why people often sue, I think, when they lose in Arkansas because the pain and the concept you can't run a business, so I remember lose-

Seth Adler: Well, also, the time that has been put in, I'm now financially behind an eight ball of sorts.

Mitch B.: And me and my investors.

Seth Adler: Yeah, exactly.

Mitch B.: You owe shareholders a duty, so in many states ... I mean Maryland, as maybe one of the proudest moments in my entire career, we actually had put two years in, spent $2 million. I spent 50-something days in Maryland, a year away from my family. I had young kids at the time, my wife. We made a commitment to this, the medicine, my partner, and so we went after it, and we lost, and it was shocking and distraught, very ... I actually did an interview with Pete Kadens, the CEO of GTI. I don't know if you were able to watch those. We have these eight episodes, but only three have been released, but Pete and I talk about meeting in Pennsylvania in 2015 when this whole concept of MSOs didn't even exist, and so we crisscrossed Maryland. We met with every government body in all the economic development, and we built this beautiful business on local partners. We're incredible, healthcare-focused, medical focused, and then you lose.
What we did, we had built such a strong, I guess, plan that a group that won, six months later, we merged with them. We saved everyone's money. All our investors got their money back plus. We ground away in the darkness of night to find a partner. We partnered with a local family who had won that didn't have a lot of expertise on the ground, and we were able to floor a plan together. For me, that was being able to ... How you deal with loss, and how you deal with disappointment, and how you deal with the setbacks, which are going to be natural in the space. I don't know how guys from GTI, or MedMen, or Cresco, or any of the big companies deal with setback, but they happen daily. There's great things. It's not linear at this point. It's not just straight up.
For us, the way we dealt with setback was we went to work. We went back, and we used our ability to consume data and information, all those things, and we looked for a partner, and we kept at it. We had some false starts, and we kissed a few frogs, and then we found a family that really wanted to build a medical-focused business, and they wanted our plan. They wanted something that was a little bit more built because everyone was starting from scratch.
Even though we were one of the last two because it took us six months to partner up, we were one of the last to get a license. We were only six or seventh on the market, so we beat half the companies in Maryland that had had their license from day one because, often, people tell this aspirational story, but half these applications are filled with fluff at this point, right? They're built on things that will never happen. If you're the person who's telling the true story of, "This is what we do, and this is what we can do," I don't think it sells as well as, "Hey, I have a biochemical scientist from Israel." That guy's never going to need to be there.
It's one of the things that, just shifting just quickly forward to Merida for a second, we focus on governance. We often say governance like, "Oh, this is my board member," or ... Recently, the political appointees to advisory boards, we both know, come on, admit it, it's all air. You know it, right? I mean I see you're laughing but, for your audience, but what do you think? I mean I'm curious to hear your opinion. When you see, recently, one of the large companies with a large [mar cap 00:25:07] just announced that Michael Steele and-

Seth Adler: Howard Dean.

Mitch B.: And Howard Dean have joined it. They're on the advisory board. Explain to me what those guys know about business because pretty sure government never had a balanced budget, and I'm pretty sure government is not the place where you go for business excellence, governance, and all those other things.

Seth Adler: You asked me for my feedback, and here is the only thing that I'll say.

Mitch B.: Okay.

Seth Adler: Both of those people had the opportunity, as any other legislator that gets into this or regulator or-

Mitch B.: You're right. They could have made the changes when they wanted to. I knew you were going there.

Seth Adler: Hallelujah. Hallelujah.

Mitch B.: You know what? That's so funny because what you just did is you made a factual statement when I asked for an opinion, but you're ... It's hard to make a judgment on it because maybe they do bring government excellence and other things, but it does feel to me like, with all the political appointments in the last three to six months, I start to question whether that's real governance. Real governance, to me, isn't something that we have the right person. It's what those people are doing. The real job of a governance-focused investor is to steward the board. It means getting involved. It means actually proactively asking questions. It doesn't mean that someone can call you to make an introduction six months later so that you can maybe make a political connection.
That's what I was saying is it feels to me like some of the governance in this space is very itinerant and esoteric rather than real and proactive, and so we try to be the opposite way and, sometimes, it can be a little bit of a culture clash when you start to enforce governance. One of the interesting shifts for me was, after the rigor of all these licensing battles, I felt like, for me, after Maryland, even though we still fought to get this business up and running, I decided, for me, the best use, the highest and best use of my time and the expertise I developed with some thematic knowledge of cannabis, the regulatory process, having met thousands of local people, constituencies ... People were sending me so many deals to vet that I felt like ... and I always wanted to be charitable with my time and ... My original partners in Connecticut and other places, they were growing and doing a great job, but I felt the highest and best use wasn't necessarily applying for licenses. It was to build the businesses that didn't need licenses to actually operate. That's how Merida was really formed.

Seth Adler: There we go.

Mitch B.: Yeah. For me, it was like, hey, what if ... I went to Glenn Taylor. He was the former head of one of the largest groups at Medco, around a $50-billion P&L, one of the most humble human beings on Earth because he's from Minnesota. There's also Minnesota's nice. That's that passive-aggressive thing. He may not always tell you, "Hey, there's a problem here." He'll just laugh at you, but Glenn and I are great friends. He was originally our partner in Illinois, so we met him in a losing process as well but, to be fair, we lost to a group like Cresco in Illinois. We were second behind them in a certain zone, so you can't ... When you look back years later, the two places where we applied, we lost to GTI and Cresco. Hey.

Seth Adler: Okay, fine, take those losses.

Mitch B.: Yeah, yeah, take those losses. I developed relationship with both those companies, and they're wonderful human beings [inaudible 00:28:01], but going back to what I was going to say, Glenn said to me ... I called him up right after the disappoint. I couldn't get off the ground. After Maryland, it took three or four days before I could literally even get back to business, and I'm a very happy-go-lucky person. I hope that comes off.

Seth Adler: It certainly does, yeah.

Mitch B.: Yeah. You can't fake that, right?

Seth Adler: No.

Mitch B.: It's-

Seth Adler: You can hear it in just the tone even if you're not paying attention to the words.

Mitch B.: Wow. Someone once said, "I'd love to see a video of you on mute."

Seth Adler: I'm [inaudible 00:28:28] it would be very ... It'd be happy.

Mitch B.: Thank you. I appreciate that.

Seth Adler: Yeah, yeah.

Mitch B.: I hope that's a compliment. It's a-

Seth Adler: It is.

Mitch B.: Yeah, it's not stray voltage.

Seth Adler: Indeed.

Mitch B.: Someone once told me in college that one of the fun things they did, and I think it was probably while they were consuming some cannabis, was to watch Arsenio Hall on mute, and they would ... because of the gesticulations and other things. They just said, "You could watch it on mute and literally have no idea what they're talking about and laugh your ass off."

Seth Adler: Still entertaining.

Mitch B.: Beyond because, remember, Arsenio was nuts, right?

Seth Adler: Well, that was-

Mitch B.: He was a wind-up clock.

Seth Adler: What that was, though, was that that was the alternative to what was happening. You know what I mean? Just like Dick Cavett in the late '60s, early '70s, he quieted things down and had very long conversations.

Mitch B.: Right. Well, Arsenio would literally hug you, cry. What it was is, when you started to watch it, it was like a three-act play. You were literally watching Shakespeare unfold with Arsenio because he was in your face, and then he was hugging you, and then he was sitting back in the thoughtful, "I'm going to be in repose and let you sit back and ..."

Seth Adler: It's been-

Mitch B.: It was unbelievable.

Seth Adler: It's been-

Mitch B.: It was unreal because the guy got me into it. I'm not saying I ever consumed. Mom, if you're listening, it wasn't me.

Seth Adler: I mean I feel like-

Mitch B.: Because I own a cannabis fund [crosstalk 00:29:44]?

Seth Adler: Hasn't that ship sailed as far as ...

Mitch B.: Well, I have kids but, and you know-

Seth Adler: Okay, fine.

Mitch B.: No, the truth is-

Seth Adler: You have kids that are under 18 is your point.

Mitch B.: I do. The reality is-

Seth Adler: Or 21 for that matter.

Mitch B.: We were highly focused on medical. I'm still really passionate about it in fact. I don't think, when you're in our office sitting here, that we give the ... There is a very institutional ethos that-

Seth Adler: Indeed.

Mitch B.: It may because I started on the medical side. The reality is consumption is going to be what it's going to be in the world regardless of my personal feelings on it either way. I do believe that it should be highly regulated. I don't believe it should be treated any different than other substances that can have negative connotations.

Seth Adler: Amen.

Mitch B.: Alcohol being the clearest one. People who really want this to flourish probably ... The stability that comes from high regulation is important, but going back to Glenn, a guy who's run this institutional P&L ... We're going to go everywhere, I guess, and we'll get back, though. I promise. My partner, Kevin Gibbs, at the fund, I was on the phone when he got the email saying we didn't win, and his first words when I heard the ding of the email ... That's how bad it was. We're sitting on the phone. I hear the ding, and he goes, "I'm going to be sick," worst ... You know. You don't need to know. You know. After four-

Seth Adler: You don't need to hear the actual words, yeah.

Mitch B.: It doesn't even matter what the letter says.

Seth Adler: Yeah, right.

Mitch B.: I called up Glenn after four days, and I said, "You know we were going to launch this fund. What if I could build what we just built in Maryland, but I could do it and not need a license to operate?"

Seth Adler: There you go.

Mitch B.: "What if we could put all this knowledge and thesis behind companies that were ancillary or ..." He said, "I'm in." He was the first commitment. One of the local families in Maryland that lost, we just lost, and they committed to the fund, and so just watching the way we built it, they cared more about what we had achieved regardless of the result because the result you can't ... It's the same thing with investing. You can't guarantee a result, but if you bring governance, if you bring honesty, and transparency, and integrity, and all those things, you're more likely to have a better result, and so Glenn said, "I'm in. I'd love to be involved." At that time, we were also on the board of a Minnesota grower that we had won, so we had won a few others. We had lost a few. Nevada was successful. We'd been successful, and we failed, and we own those failures and take responsibility for them, and now Merida has been built, so it ... I hope I just gave, for you, the real context of how Merida was built.

Seth Adler: 100%, and it really ... You've just highlighted the fact that we've been talking for about a half hour, and I only asked one question, so that's pretty well done, Mitch. That's pretty well done. I'll ask one more-

Mitch B.: Oh, gosh. Unfortunately, my brother's going to listen to this, go, "Mitch, you did it again."

Seth Adler: I'll ask one more question before the final three questions.

Mitch B.: Wow, okay.

Seth Adler: The one more question is this. Podcast land knows no time, but we are making our way into 2019. What do you see? For the folks that listen, whether they're interested in governance, whether they're interested in science or the business of cannabis, what do you see as the short-term future, 2019, and then after that?

Mitch B.: Well, the other thing I hope I get some credit for is I haven't talked my book.

Seth Adler: No, you have not.

Mitch B.: I think I might have mentioned two companies.

Seth Adler: Maybe a couple times here and there, exactly, and on point, exactly.

Mitch B.: Right, but only relevant, only relevant.

Seth Adler: Exactly.

Mitch B.: Right. I was funny. I was on a panel two days ago in Toronto at the Global Forum talking about disruption of cannabis from global medical, and we were talking about segmentation. One of the people on the panel kept bringing it back to their business, and I found that to be ... People in the audience, unless they were looking to invest that minute, were probably ... I'm sure they were like everyone's-

Seth Adler: Turned off.

Mitch B.: Yeah, everyone's talking general. The chief knowledge officer, John Kagia, from New Frontier Data, one of our portfolio companies, relevant, though ...

Seth Adler: Sure. I also pronounce that differently.

Mitch B.: ... was on the ... You probably say Kagia.

Seth Adler: No, Kagia. Yeah, yeah.

Mitch B.: Okay, even worse. He's not in a cage, see?

Seth Adler: No, I got you.

Mitch B.: I'm giving you all the mnemonic devices.

Seth Adler: I hear you.

Mitch B.: I'm giving you phonetic memory.

Seth Adler: My person's Giada. You know what I mean?

Mitch B.: Yeah, of course.

Seth Adler: So I'm not going to-

Mitch B.: I often say that Merida is ... Think of how you don't think of Merida. Think of us as meh, it's boring, but we're not boring, so now I do the reverse. That's Merida. Someone gets either of those wrong, but anyway, so he was talking generally about data and stuff, and I'm talking about general thematic things. Then someone's like, "Well, I grow for this person in ..." It's sort of eye-rolling, but everyone ... It depends on how long you've been doing that and if you understand. Having spoken to enough people in the space, they really don't want to know about your companies. They want to know what you think or how you think. To your question directly, I think there's going to be a lot of disruption, and I think one of the things I'm really intrigued by and I'm doing, I write these commentaries. I don't know if you had a chance to read them.

Seth Adler: Little bit.

Mitch B.: Yeah. The new one, I've come up with a ... Often, what I do, and this is maybe cheating in some way, but I'll put it out in the world that I'm going to put it out, so then I put this external pressure on myself to put it out because these are hard to write. I mean I'm already working 95, 100 hours a week. It's hard to sit down and write a 15, 20-page thing sort of de novo when you're working this hard and, as you see, there's some activity now.

Seth Adler: Why are you doing that to yourself?

Mitch B.: Because-

Seth Adler: For real.

Mitch B.: Well, because I really feel strongly that there's ... First of all, we use our investors and the market as a sounding board, and so I'm actually putting out things that I think people will then feed back, and it brings ... Instead of walking in and spending 45 minutes in a conversation with people trying to find the place where you overlap, I've already ... I'm getting deeper into meeting much quicker because I'm already expressing ...

Seth Adler: It's already out there.

Mitch B.: I'm articulating where I want to be or where I think about. Our shareholders know what companies we're looking for, and they're all getting ... Look, these are all sophisticated accredited or qualified investors. They're getting 50 deals forwarded to them, and so, in some ways, I've actually created a much more efficient business by working my butt off to write these things, right? The research that goes into these, and I hope you've seen that when you read it, is they're ... I kill myself to write wide thinking, broad thinking but very specific. There's some really specific things in there that are data points, and so what happens is, as you start to think about these data points, you start to get a knowledge of ... you start to see things that correlate to it, and that's how ... I'll show you after, in our office, the last notepad that underpinned the last commentary. We're starting to keep my random notes about these things so that we could show people what the random notes were that became that 15-page piece of writing.

Seth Adler: Look at that.

Mitch B.: The last one was about MSOs being undervalued. I'll show you the note pad in a few minutes. Unfortunately, that's not great for radio, but it's something just as ... You can talk about it yourself if you want. Anyway, going to what I think, I'm really intrigued by some of the shift that's going to occur in mindset. I wrote on Twitter what the next title is, and it really is where I'm deeply intrigued, which is legalization leads to a broader destigmatization, which leads to a colonization, and that's the good kind. Think of the moon or Mars not aboriginal New Zealand.

Seth Adler: Understood.

Mitch B.: By colonizing, I think what I mean there ... I think what I mean because I don't never know til I start writing it, right now I only got a working title and some notes, is the colonization of a mindset of, "I use alcohol, and that's my beachhead, and I am now willing to consider using a substance for whatever reason," because remember, there's no real medical marijuana. There's a substance, and that substance can be manipulated in a variety of ways. On that panel, where I was going with that is there's a segmentation that's going to occur as ... Right now, it's medical or adult use. That's really a government thing. That's a top-down delineation.

Seth Adler: Same plant.

Mitch B.: Yeah, same plant. There's no medical. It's how you use it.

Seth Adler: Yeah, what are the cannabinoids inside and then how are we treating those?

Mitch B.: Right, and we're not even there. I mean we haven't even figured out what that segmentation is. I'm talking about segmentation of the usage where a father who's getting a tincture for his epileptic son is not going to want to stand in line next to someone who's just buying it.

Seth Adler: I got you.

Mitch B.: They have different questions. There's different expertise that are needed. There's different communications. The medical side's not only going to go away, it's going to accelerate, so I'm intrigued by this mythology that as rec comes, people just decide. I mean, yeah, no one wants to be on a registry. Eventually, it's going to be like using other medicine where your recommendation might be for cannabis, but then you decide who the experts are, and you'll be able to use a desk reference and see that, so-

Seth Adler: I think that the conversation around does it go away is who does it go away from?

Mitch B.: That's a great point. It changes for regulators, which mean ... You're going to see segmentation. You're going to see a consumer usage here, a consumer usage here. People might be using it, as a consumer, for sleep. That's not necessarily the most medical. People use other sleep aids. They might use kava kava if they want to use homeopathic, but there's also people taking prescription-strength sleep aids, and so that's segmentation as you start to deconstruct the plant.
I'm intrigued by this shift in ... Oh, after colonization, sorry, comes normalization. With that comes a deep shift in mentality, mindset. People like my mother who are not users might say, "I'm going to take four drops of CBD under my tongue to go to sleep or for my knee pain or ..." The broad application of what that is, I don't think people people, everyone, can actually judge what the size of this is going to be, so the name ... That's why the working title, and I'm curious to hear your feedback, is ... it's called Size Matters: Why CBD/Cannabis Will Be More Impactful Than Any Reasonable Estimate, reasonable estimate, not 50 trillion, no, but reasonable estimate because people were actually thinking this through on an econometric basis, New Frontier being one of them.
I think it's hard to judge what that shift in consumer mindset is, so where I'm really intrigued and what I think is next, from an investment perspective, and obviously not to give too much of where Merida's looking because I don't need the competition, it's already a very competitive space, is what are the things that that will affect, that shift in mindset, that shift in usage? What are going to be tools that are needed? That's four logical steps removed, so think of people are going to be using it more, thinking about it more, looking at it more, talking about it more, whatever. What are the models? What are the business models that exist in the real world that are going to be affected? I'm not saying dislocated. Maybe they are all successful. Maybe Constellation becomes bigger than anyone. That's not disruption. That's eruption. I don't know. I just made that up, but-

Seth Adler: That's pretty good, yeah.

Mitch B.: Yeah, who knows? Yeah, thank you. Thank you.

Seth Adler: Tweet it out, yeah.

Mitch B.: Oh, gosh. I'm trying to Tweet less because the problem is I've started to notice that Twitter is literally the most tribalistic place in the world. No matter what you write-

Seth Adler: It's a weird place, man.

Mitch B.: ... people find a way to me too it on ... By the way, if you comment on my feed out there, I love you all. I try to engage with you all as much as I can. The reality is I'm not in front of a computer. I'm sitting with people like Seth here. You should have seen my AMA on Reddit. In two hours, we typed 58 pages of content.

Seth Adler: I believe you.

Mitch B.: Yeah, no, I write like I talk.

Seth Adler: Yeah, exactly, exactly.

Mitch B.: I will say that so I'm looking-

Seth Adler: We can't even conceive of how big this is going to be.

Mitch B.: Well, that's size. That's size, right?

Seth Adler: Yeah, right.

Mitch B.: That's size. The models, and just to throw out a few thought pieces is, and I started to talk about it a little bit publicly so it might be a company that does long-term care for elder. Right now, whatever their business model is, I can assure you cannabis usage is not in their model. Some of the things that catalyze that thought is I remember being in Las Vegas a few years back and thinking that it looked to me ... I saw some people smoking a joint outside. This was at BizCon a few years ago when it was still not recreationally legal in Vegas.

Seth Adler: In Vegas. Got you. I got it.

Mitch B.: These guys were smoking a joint out back, you know?

Seth Adler: Yep.

Mitch B.: Literally, these people smoking got a sense that they saw a camera and, immediately, they realized that they might be on camera, and casinos are very facile at looking at ... they have algorithms that tell them, "You need to look at this camera right now." It's crazy, right? I don't know it for a fact, but I'm guessing.

Seth Adler: Well, you've seen the movie Casino.

Mitch B.: Well, I see that a guy grabs a chip and, four minutes later, 18 guys descend on him. I'm sure that's not just random. I was thinking more Ocean's Eleven, but whatever.

Seth Adler: Fair enough.

Mitch B.: So there you go.

Seth Adler: The original?

Mitch B.: Yeah.

Seth Adler: No.

Mitch B.: Oh, no, not that one.

Seth Adler: Yeah, the Soderbergh remake.

Mitch B.: Yeah, yeah, and not Ocean's Eight, no. I have no idea-

Seth Adler: That's even newer. That's even newer.

Mitch B.: I think that's like the Ghostbusters version of Ghostbusters. It's the new reboot.

Seth Adler: Sure.

Mitch B.: Yeah. I don't know how it did at the movies, but I'm guessing, since none of us know about it ...

Seth Adler: Oh, I saw it.

Mitch B.: You saw it?

Seth Adler: Yeah, sure.

Mitch B.: Was it good?

Seth Adler: I can tell you that I saw it.

Mitch B.: Was it good?

Seth Adler: Was it good? It was-

Mitch B.: You really are good at not giving your opinion on anything.

Seth Adler: I try to.

Mitch B.: You're a great interviewer in that way.

Seth Adler: I appreciate that.

Mitch B.: I probably make it easy because I talk for 44 minutes on a question.

Seth Adler: On one question.

Mitch B.: On one question. Going back to the-

Seth Adler: It was entertaining is what I'll say.

Mitch B.: Yeah, okay, so going back to the disruption, one of the things I ... What I noticed is these guys got a sense. I'm sure, as cannabis smokers, they probably have a sense of danger either way. All of a sudden, there were like nine guys in yellow coats about to beat the crap out of these people, so they ... The joint went flying, and they're standing there like, "What's up, man? We don't have anything with us." These bouncers all look at each other like kicking stones. They're like, "Well, we were about to get some ... We were about to get rowdy on them."

Seth Adler: Yep, no need.

Mitch B.: No need. I started to think about how different it is because I think casinos are actually built around ... Obviously, I have one of those Tetris minds that I see something, and you try to contextualize it immediately.

Seth Adler: Tetris mind. That's exactly what I'm looking at. That makes sense. When did you figure that out for real?

Mitch B.: A long time ago.

Seth Adler: Yeah. No, that's exactly it.

Mitch B.: You walk on the street, and you look at the bricks, and you're like, "Oh, if you rotate those bricks-"

Seth Adler: Da, da, da, da, da, da, yeah.

Mitch B.: That's how facts are and information. That's why when people often ask, "What is Merida at its core?" we're voracious consumers of data and information, and then we turn it into an investment thesis.

Seth Adler: See, now I'm going to end it because you're talking about the whole thing. We talked about kind of making our way into it.

Mitch B.: Let me give you the one dislocation, disruption because I think-

Seth Adler: Please.

Mitch B.: I started to notice that I don't think casinos ... they're ready for rowdy, alcohol-driven behavior, and cannabis people are, first of all, not rowdy often.

Seth Adler: Nope, right.

Mitch B.: The evidence disappears. A guy who's drunk, you put him in the drunk tank, he's still drunk eight hours later. You're like no one's going to question why you arrested him because he's literally throwing up in the corner of the jail.

Seth Adler: You can see that he is, yeah. Right.

Mitch B.: Whereas a stoned guy, three seconds after the joint disappears, yeah, sure, he's glassy-eyed, but he's kind of not bothering you, and what's the point of giving him the choke hold, right? I started to think about, wow, they're going to have to actually retrain, and there will probably be a company-

Seth Adler: Security. That's it.

Mitch B.: ... that will get paid a lot of money to retrain casinos. Now, two years later, now that I was in Nevada at MJBiz recently, I started to think about how much I've seen the change, and I'm sure there was education and retraining, and someone spent money on that, right? That's not free, right? Because Vegas casinos probably said, "Hey, let's have an outside consultant, and we'll have lunch-and-learns or whatever it is because it's money." If they beat the crap out of a person, they could be look ... especially a person who has their hands up on camera. It's not a good look if a stoner has his hands up, and you're actually choke holding him into ... his face is in the craps table, and all he was doing was walking through vaping. They've had to rejigger their thinking, I'm sure. What I started to think is how that can ... Think about that and multiply that times 1,000 other businesses. I started to recently sort of talk publicly about an assisted living facility not geared towards any ... I always get back. It's crazy.

Seth Adler: Yeah, it's good.

Mitch B.: It's crazy.

Seth Adler: It's good.

Mitch B.: Always get back there.

Seth Adler: Yeah.

Mitch B.: I started to think about those assisted living facilities and how they're geared towards other types of behavior, and so how someone's going to figure out, someone who's passionate about cannabis, maybe, and likes it might say, "I'm going to do a Sunrise Assisted Living, but it's going to be geared towards midnight buffets and good food and gourmet food so people ... and maybe cannabis testing," or whatever it is. Or maybe they're just going to say, "I'm just not going to stigmatize you," because you saw in Buffalo, recently, a guy who vaped was kicked out of his subsidized housing in the middle of a 10-degree night in Buffalo. It was a [crosstalk 00:45:15] article.

Seth Adler: They're all 10-degree nights in Buffalo, but that's a different point. Yeah.

Mitch B.: Oh, that's a fair point, a fair point. There's going to be retraining. There's going to be education. There's going to be assisted living facilities. That's just one. Think if it, no one's ... At least personally, I'm not saying I'm taking credit for incepting that into the mind of the world, but the reality is that there's models that none of us have even discovered yet that are going to be somewhat affected, and someone's going to make money filling that gap, and so we're always intrigued by that friction.
We think of it as wood. You can either sand the wood or you can rub it. I think you get a better piece of wood when you sand it, and so we're looking to invest in those models where we can deconstruct some of the friction that's going to exist while this all shifts, and the reason is I think usage is going to be huge, whether it's medical or otherwise, and I think people are not going to feel comfortable being in places where people make them feel bad or don't accommodate. Apartment building where young kids live, that mom's not going to want to smell joints, so maybe they're going to wink, wink say to people coming in, "Hey, if you're going to use, vape." There's going to be modular changes.

Seth Adler: I'll take your bigger point, which is did you who owned a taxi medallion at the height of its value think that the iPhone, essentially, was the thing that was going to put you out of business?

Mitch B.: That's honestly a phenomenal question.

Seth Adler: You know what I mean?

Mitch B.: It is. No, but it's interesting because I think I-

Seth Adler: In other words, the assisted living facility, CDB is the iPhone.

Mitch B.: That's a great point. Because of Uber, you're saying.

Seth Adler: Yeah.

Mitch B.: Yeah, the point you're making.

Seth Adler: Yeah.

Mitch B.: Yeah. No, it's actually an insight. Gosh, I'm going to ... That might end up on Twitter, but I'm going to hot tip you, I promise.

Seth Adler: You got to do it.

Mitch B.: No, that's just such an incredible ... It's interesting you say that because I ... That is where we're living. My original partner, Ethan, used to say this thing which I'm not sure makes actual sense if you deconstruct the sentence from a syntactical component. He used to say, "it's prohibition meets the internet." I don't know what that means, but that's-

Seth Adler: Kinda.

Mitch B.: It's a great selling point and an extremely charismatic individual who ... It actually comes across really well, but we used to sit at ... I once said to him when we were in Maryland, we probably crisscrossed the state, I think I actually once ... I asked him, I go, "You know, when we really break it down, I've heard you say it [inaudible 00:47:26]. It really doesn't make any sense."

Seth Adler: No. Conceptually, it does, yeah.

Mitch B.: Conceptually, but you know what it was?

Seth Adler: Don't think about it.

Mitch B.: He was translating what people are thinking into ... It was one of those things where it was one of those [inaudible 00:47:36] like it just works, right? It was sort of like Chick-Fil-A, I guess. It just works.

Seth Adler: Yeah, sure. The sandwiches taste good.

Mitch B.: I can't say that fast food chicken sandwiches ... They're probably rubbery, but it just works. People eat them and love them, but anyway.

Seth Adler: Yeah, and some with the special sauce, yeah. That's a different company, but-

Mitch B.: One of the challenges is also, like you just identified, was, for me, moving away from those original partnerships to a model that was more driven by Wall Street because you're right, while they are fantastic operators in what they do, this model of Merida is a far different constituency and skill. That's been a little bit of a shift because of these deep personal relationships and moving to a model where you go from working with people every day that you've kind of grown up with to sort of going out in the wilderness. For a while, that was a challenge, and a personal challenge, but I guess the thing that got me through it was these big-picture items that I saw and the ability to maybe create more of the wide space. Like you said, the licensing aspect, the taxi medallion component, is challenging.
Now, MSOs, which I wrote recently, the people who are going about it and going about it well deserve the most amount of credit. No matter how much I zing MedMen on Twitter for small governance things or governance things, the reality is they deserve a tremendous amount of credit, which I gave them in that commentary, for being pioneers, for being willing to wake up every morning, go through the slings and arrows, plant [inaudible 00:49:01]. I don't know if that stock's worth buying or not. I'm not making any qualitative judgment there or ... The reality is-

Seth Adler: You're just saying that you see the work.

Mitch B.: There's 10 MSOs or 12 MSOs or 15 that are going to work. They're going to make sense. They're going to keep grinding. They're going to send people out to Arkansas and Tuscaloosa, Alabama, and they're going to make these local partnerships, and they're going to grind away on the road bleary-eyed, travel, all these things. As I said in that, the biggest thing I get when I'm calling a CEO is, "I'm going through security. Call you back in a bit." I literally could show you emails. There's thousands of those or texts.
That's another Tetris moment. I just noticed that these CEOs are killing themselves, and I did that once, and my partner did that. They run a great business, and Minnesota looks ... LeafLine Labs is a great grower, and you can be proud of what you built in Nevada being another state and now Maryland. I can be proud of those moments, but the reality is those people deserve all the credit for stewarding those state entities, and I shift it to trying to serve the packaging or HVAC or whatever it might be. That's where I felt the best highest use because of, I think, the broad ... There's only so much you can do to develop your state model, and it can only go so much so further, and then you can either ... you could sell it to an MSO who's going to take it to that scale.

Seth Adler: Then what's the traditional business model?

Mitch B.: Then what's the traditional business model? Exactly.

Seth Adler: There you go.

Mitch B.: For me, being able to take all those years of Wall Street, what I noticed over time is that I was much more interested and focused, and I think there was a disconnect in some ways. People who do their jobs really well often don't recognize what goes on outside their excellence to make their excellence translatable into a value proposition. It's a very hard discussion that people have all the time.

Seth Adler: Interesting.

Mitch B.: It's the operator executive disconnect, right? [crosstalk 00:50:46]-

Seth Adler: Or entrepreneur operator, yeah.

Mitch B.: Entrepreneur or first series A. I guess maybe because I have a history of a lot of those investments, I sort of understood that friction and understood that dynamic, so we've been able to translate that as Merida as understanding what the entrepreneur wants, what they're ... because I'm an entrepreneur. Merida's still a business. We have 15 people working here now. I understand how running a business matters. At the same time, that friction is where I think there's a great opportunity to be supply chain driven because of that friction. We're really good at what we do. How do we get better? That's the only place you can really think of what is the perfect form of excellence if you own a license in a single state at this point? It's building it so that someone else wants to buy it for a lot more.

Seth Adler: There we go.

Mitch B.: Right? For me, give the MSOs their credit. They're going to roll up good ones, and the MSOs who buy well ... If you're really investing in an MSO right now, you are investing in some form of operational excellence, but what you're really investing in, at it's core, if you buying publicly, and I'm not going to name, but you know the 15, and I'm sure all your listeners know the 15, you're buying into the ability to buy well, to buy smart, and then to manage these frictions. You're almost buying into a Merida, that you don't even realize you're buying into a different portfolio, right?
The other funds, there's 10 funds that are doing such a tremendous job, and I have these conversations with these people, and you walk away from these conversations, and you're so blown away by how brilliant and how much they deserve credit too, so I don't want to make this just about Merida doing something unique because that's the Dunning-Kruger effect, thinking that you're the only one doing this. There's a lot of people doing an incredible job, and they deserve their credit and their due, and when I communicate with them, I try to learn something from those conversations. I do think there are some differentiating factors. We do rip apart things a little bit more like the Tetris, the rotational aspect.

Seth Adler: Yeah, sure, exactly.

Mitch B.: We also have this historical element of being in the room when that friction occurs or when those-

Seth Adler: Yep, in the moment.

Mitch B.: In the moment. I think I've learned so much from my original partners in watching them operate, literally be on the ground. I used to be in that facility a lot at first because it was the only thing we had, and just the conversations and the learning and realizing, "Hey, there's a way we might do this better." If you think about what the maximal evolution of that is, it's not connecting companies in a [keiretsu 00:53:02] Japanese supply chain excellence. It's building it so that someone else wants to buy it. I felt like you can so that in a lot of different companies. For me, the highest best is to find 15, 20, 30, whatever how many companies it is, that are smaller, don't have the license, don't have that risk, so it's a little more risk mitigated.
The upside may be it might be more binary, less binary in some cases. Hopefully, you find ones that it's digital not analog. That's, I guess, using all that skill to then find those models, but always keeping our eye on the bigger picture. That's why you asked the question before which ... one of the few, which is why do I write those things? It's because it allows me, actually, to sit back and think about all the things I've learned and give credit to the people and slip in these subtle [crosstalk 00:53:46]-

Seth Adler: It allows you to line up the rows in Tetris, essentially.

Mitch B.: Yeah, yeah. Well, and really, and also recognize the pioneers, I mean, and just sort of show my appreciation for the people who deserve credit. I often sit in conversation with people, and you can get a little emotional about it because you've watched people do incredible things in a space that didn't exist. I think that's worthy of a lot of credit. No matter the interpersonal tension you have with your partners or people you're trying to invest in who walk away and do someone else's [inaudible 00:54:17], there might be a moment of like, "F them," for a second, but the reality is everyone who's in this space who has developed a business has a real revenue model.
Unless they're doing things that are unsavory from a governance perspective or otherwise, they really deserve a ton of credit, anyone, for having taken that pioneering step and building a business off it and being able to create something out of a white space. Those writings allow me to crystallize those thoughts. It think it's also people just enjoy them. Let's be real. As a human, knowing that people like it probably drives me. I mean the open rate, the open rate, and I want to make sure I'm somewhat accurate, about ... It's opened more than 45% within 24 hours. I don't know a lot about the internet on that side, like clicks per ... I used to do a lot of that CP-

Seth Adler: You're talking about emails.

Mitch B.: These are random emails from info@meridacap. People open 45% open rate within 24 hours.

Seth Adler: We just blew-

Mitch B.: I don't know ... Yeah.

Seth Adler: We just blew past one call, and we're on our way to a second call. That was the ding that happened on my computer.

Mitch B.: Okay. Oh, oh, interesting.

Seth Adler: I want to make sure that we land the plane, right?

Mitch B.: Sure, yeah.

Seth Adler: Mitch, I really appreciate the way that your mind works because I have just ... This has been very interesting.

Mitch B.: Oh, wow. Okay. Well, I appreciate that.

Seth Adler: I'm looking forward to talking to you again.

Mitch B.: Okay, great.

Seth Adler: All right?

Mitch B.: Yeah, my pleasure.

Seth Adler: For now, the final three questions are ... 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 got to be on there. First things first, you talked about your history with cannabis. What's most surprised you?

Mitch B.: Wow, that is an incredible question. I would say what's surprised me most is the speed that the beginning of small legalization ... I remember I told you we sat back and we said, "Whew, that was winning, and that was a rigorous process," 1,800 pages, raising the money, doing everything beforehand, right, [inaudible 00:56:11]. What surprised me the most is the speed and velocity and what I realize now. I'll tell you the reason why it surprised me the most it already exists. There's no consumer base that has to be developed. It's a $50-hundred-billion business worldwide that exists, so it's not like alcohol or other thing or ... I'm sorry. It's not like other things where they're created from scratch. It exists, and it's just being converted to the legal market.

Seth Adler: There we go.

Mitch B.: Okay, so that's one thing. It's the speed and velocity and how many different people of sophistication and passion and brilliance ... The innovation that's come with that velocity has blown me away, humbled me. I told you. It makes me emotional. I aim a little earnest, like sort of saw paradise in or saw paradise in Jack Kerouac's On the Road. I feel like I'm that guy, right?

Seth Adler: Yeah.

Mitch B.: It's kind of like a frenetic kind of like, "Hey, we're running around the racetrack at 200 miles and hour. What happens when we hit the wall?"

Seth Adler: If that's who you are, what's most surprised you in life?

Mitch B.: Can it be on a highly personal level?

Seth Adler: It's your question to do with what you will.

Mitch B.: How much you can love the people around you and how much vulnerability and how little things sometimes, like your kid, a failure, or success can move you. I guess I would say so what's surprised me most in life is the beauty in the mundane.

Seth Adler: That's perfect. Leave it there, man. The beauty in the mundane is pretty good.

Mitch B.: Yeah.

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

Mitch B.: Wow. I'm going to say this, and it's horrible. Luckily, I met with a guy who manages a very prominent ... Everyone knows I love Imagine Dragons. I'm well-known for it, but I'm not going to use it.

Seth Adler: Really? Okay.

Mitch B.: Because the soundtrack's different based on where you are.

Seth Adler: How old are you, though?

Mitch B.: I am 44.

Seth Adler: Imagine Dragons? Really?

Mitch B.: I would have said, but I'm not going to say this one. I would have said Whatever It Takes because it's about being forthright in challenges and headwinds because those guys left the Mormon church, and so they have-

Seth Adler: Good message. Good message.

Mitch B.: However, if I had to say one, and my brother is going to laugh when he listens to this, and he will listen.

Seth Adler: Father brother.

Mitch B.: My father brother, although Eugene [Berkowitz 00:58:17], you are my father. You're the man. I love you.

Seth Adler: Fair enough. There we go.

Mitch B.: I'm going to say this. I want to say a Smiths song because I love them, but because of the Shakespearean element, I'm going to say a Radiohead song. It's going to be Airbag. If you listen to it, it's like a three-part Shakespearean ... It's one of those songs, what I would say, where ... You know what? The songs I love the most are the ones where, if you listened to the last 30 seconds, you wouldn't know where it started. The music has changed, the bridges, the transition. How Soon Is Now would have been my normal pick because that song is so iconic.

Seth Adler: Yeah, but we'll go with ...

Mitch B.: We'll go with Airbag from Radiohead.

Seth Adler: Mitch, thank you so much for your time. Thank you so much for your mind, man. I'm not kidding.

Mitch B.: Well, I appreciate that.

Seth Adler: I really appreciate it, and I look forward to checking in with you down the line.

Mitch B.: Whenever you want. I really appreciate you caring, and thank you for your stewardship of the cannabis industry. People need to know these things to really get behind it.

Seth Adler: Too kind.

Mitch B.: Okay. Thank you.

Seth Adler: There you have Mitch Baruchowitz. 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.