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Opinion

  • David Bennett posted an article
    The reason why cannabis licenses are limited see more

    The Economics of Scarcity

    The artificial creation of the scarcity of facility licenses increased their value exponentially and created a parallel “license economy” outside of the normal business activity of producing and distributing products and serving customers. Demand outstripped supply of available licenses ten to one. While the normal economic response to scarcity is for the price to go up and the scarce resource is allocated to the buyer willing to pay the most, this was an intentionally created scarcity that the buyers competed for, not by willingness to pay more but by participating in a beauty contest in an idiotic competitive scoring system and 500 page applications.

    348 licenses that were granted immediately became worth millions of dollars each. At least a half a billion dollars in wealth was created out of thin air before the first seed sprouted.

    The scarcity of licenses is a permanent feature of the cannabis market prescribed in Article 14.  With the state having a complete corner on the market for licenses, they control the supply and therefore the price of cannabis products. Businesses must compete for the scarce licenses in whatever manner the department chooses. Every license is in some sense a monopoly and a grant of market share.

    The market conditions created by the scarcity of licenses makes the application process a high risk, high reward endeavor and raises the “bar of entry” too high for most normal businesses. There is no advantage for the patients for there to be a scarcity of licenses and a lack of competition. The scarcity of licenses does nothing to protect the health and safety of society, and in fact, undermines the public confidence in government and the industry by providing opportunities for corruption and patronage politics.

  • David Bennett posted an article
    Who deserves my business see more

    How Do Consumers Support the Missouri Cannabis Industry?

    One question on the minds of many in the cannabis community as the licensed facilities begin operations  is, "who should we support and who should we boycott?"

    There is a healthy amount of skepticism directed towards anyone who succeeded in winning a facility license, some assume that anyone who got a license must have cheated or benefited from a political payoff. Of course that is not true, some may have bought their way in and others may be ordinary folks like you and me who worked very hard and invested their life savings and it paid off.

    Nor can the good guys and bad guys be distinguished by the size of their business. Good guys and bad guys come in all sizes. It would be foolish to assume you can always trust a company because they only have one employee and can never trust a company with several locations. A mix of all sizes of companies generally serve the consumer the best.

    The very idea that only a few companies are being allowed to supply the cannabis market places all of them under suspicion. So, how do we tell the good guys from the bad guys? Who deserves to benefit from our purchases?

    The good guys are hard at work building out their businesses, investing time, money, and effort to fulfill their obligation to serve patients by doing their part to build a market place to produce and distribute cannabis products. They were ready to go when the bell rang.

    The bad guys are in no hurry to invest more money in the business. They are sitting on a facility license that is worth millions of dollars due to the economic scarcity created by the government monopoly. They are more interested in cashing in on the corporate asset than actually serving the market.

    The good guys are pricing their products based on the cost of production plus a fair profit and not charging 'what the market will bear', taking advantage of the scarcity of product resulting from the intentional scarcity of licenses. They are building their brand by earning the trust of their customers with quality products, good service, and fair prices.

    The bad guys are unprepared to produce quality product efficiently. They are bringing substandard products to market and charging higher than reasonable prices, taking advantage of the scarcity of supply.

    We should be supporting any cannabis facility that is hard at work building out their business and has made a real commitment to serve the patients. The companies that are holding back and minimizing their investment in hopes to capitalize on the value of the license itself are not the good guys.