Transcript:

Seth Adler:
Emily Paxhia returns. 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 our supporter and then Emily Paxhia. I've known the family behind Medicine Man for the past eight years. Pioneers in Colorado, the family business helped set the path for global adult use cannabis. Mg magazine has voted them top 50 cannabis companies to work for two consecutive years running. Check out their website at medicinemandenver.com or visit one of their locations in Denver, Aurora, Thorton or Longmont the next time you're in Colorado to understand how one family has helped chart the course for the next great American industry.

Okay. It's navigating the tides. It's Emily Paxhia. Emily, we were not aware that these were the tides that we would be navigating I think when we titled this thing.

Emily Paxhia:
No.

Seth Adler:
That's a good place to start. An apocalyptic hello to you and my hope is that you and yours are happy and healthy at least as much as they can be. Yeah?

Emily Paxhia:
We are, as far as we know.

Seth Adler:
Right.

Emily Paxhia:
Quarantined into a self ... What's it called? Shelter-in-place.

Seth Adler:
Shelter-in-place. Exactly. That's what we do now. What we, you and I are going to do is first talk about the macro economy, and then we'll get into cannabis. The macro economy is guided essentially by one set of graphs as far as I can tell. Sure, you can tell me about the Dow Jones, but I look at these cases and I look at these deaths and I look at the curve here. This is not a curve. This is a line that is now straight up.

Emily Paxhia:
It's going [inaudible 00:02:04].

Seth Adler:
So what do we do with your money mind? How do you look at a graph like this that affects the entire globe, and get some sense of a macroeconomic picture with which you can act on?

Emily Paxhia:
Yeah, since this whole ... And thank you for having me on and I hope you and yours are well too. So it's interesting when you're an investor, you contemplate disaster scenarios or at least as an investor I do. I will tell you this, the disaster scenarios I contemplated were terrorist attacks, wars and earthquakes that were like very acute events. The impact of those tends to be hyper-localized and tends to drive different economic shifts. A pandemic that shuts down businesses and creates an unemployment rate within a month of roughly from 280000 to three million overnight just here in the United States is something that I think most of us did not actually have in our modeling. I'll be honest. The ways that this will change the world forever, it remains to be seen. But what we can do is we can extrapolate from the past, right?

Because there's that old saying, history doesn't repeat itself but it does rhyme. So what are we looking at? I'm looking at the Great Depression if I'm honest. I think the unemployment rates we're going to see, I think that the impact on our healthcare system as we know, it's already drowning. It's already failing. The infrastructure we have is not sufficient for, to your point, that parabolic curve. When we talk about hockey sticks, this is not the hockey stick I want to be seeing, is when people are dying or getting sick from a crazy pandemic that's highly, highly contagious. So I am very concerned about where we are going to net out after the end of Q2 on this entire thing, and what the world is going to look like. But I think importantly what is going to happen for my industry is that consumer behaviors and consumer psychology is going to have shifted in a landside shift, just like we saw after the Great Depression.

Emily Paxhia:
And I think that's one of the only times we can really kind of ... We could look at long wars that were global world wars. And we can look at the Great Depression. And that's how we can understand what is potentially coming next. Except that we will now have this concept that a pandemic can and has existed in this world of this magnitude.

Seth Adler:
Okay. So what lessons specifically and then we will get into your industry, which of course is cannabis, what lessons specifically beyond what you just said are you taking from Great Depression? From the aftermath?

Emily Paxhia:
Yeah. So I think, not to be too dark, but I think that anyone who thinks that the systems are going to work well through this is I think in for a rude awakening. I think we're going to see a collapse of a number of systems that we've all taken for granted, especially our healthcare, especially our municipal infrastructure. So I think we're going to be looking at ... My guess is we will probably see an exitus from the cities. Is that people are going to look to spread out. I think that people are going to go into more of a hoarding mentality just like they did after the Great Depression.

People are already hoarding. I'm hoarding tequila. People are hoarding toilet paper. To each their own. And we've seen to some extent people are hoarding gummies in California from the orders that went crazy leading into the shelter-in-place. So I think that what we're going to see is shifts like that. I think we're going to be seeing shifts from what was really becoming kind of a very semipermeable membrane of borders where we were all able to travel all over the world as much as we wanted. I unfortunately as someone who loves to travel and frankly that's all I want to do with my life, I think it's going to be a bit harder to travel this world. And I think that it's going to be more costly. And I think that the travel industries is, as we all know, going through a tremendous upheaval. So it's going to look very different to be getting through this world.

Seth Adler:
All right. Good thoughts there. That is that industry. Let's now dive in on the cannabis industry. We do have the initial kind of little spike that we saw. Now we've calmed down from that. Where do we go from here as far as cannabis is concerned?

Emily Paxhia:
Yeah, so it's my ... First of all, I just want to mention that right now is the time that we are the most hooked on real-time data. So we're looking at all of the different dashboards we have access to. And of course Headset has the most reach across the United States. So I'm really looking at that because it's giving us an understanding of not only the purchasing behaviors in terms of frequency of purchasing, but the basket sizes and what's going into the baskets. And all of this is informing the way that we're thinking about how people are relating to cannabis during this time.

Seth Adler:
Just quickly, I'll go ahead and be self-serving and promote one of these that I do with Sy Scott. We never talk about cannabis data by the way, because he would have to advertise for that to happen. So we just talk about artificial intelligence.

Emily Paxhia:
That's brilliant.

Seth Adler:
Yeah.

Emily Paxhia:
That's brilliant.

Seth Adler:
As you were saying.

Emily Paxhia:
Sy's a really smart guy.

Seth Adler:
What's that?

Emily Paxhia:
Sy's a really smart guy. So that's a good thing to talk with him about.

Seth Adler:
Yeah.

Emily Paxhia:
So yes. And there are other resources too, like Flowhub, their point of sale they've got really interesting. So we're using everything we can get our hands on because this is, like you mentioned, this is unprecedented in our lifetime, and unprecedented certainly in the era of digital access. So at any rate, what we're seeing in cannabis is I think that cannabis has been proving to now be a part of our society. It's been deemed essential in multiple massive markets including California, Illinois, New York. And Cuomo even stood up and said ... And this is after he was not on board, so I should mention that.

Seth Adler:
No ma'am.

Emily Paxhia:
And he stood up and said he will not let COVID-19 stop the progress of cannabis legalization in New York. And I thought that was an enormous shift in the conversation.

Seth Adler:
That's a 180 from his initial standpoint without question.

Emily Paxhia:
Exactly. So to that end, I think that now we've got cannabis, right? And I think that we've got a population that is shifting to doing more things from home, shifting to maybe doing more things remotely and yeah, exactly and as you and I are today. And I think that people are also thinking about COVID-19 and who does it come for, right? It hits people with immune-compromised systems. It hits people who are having maybe less quality of health. And I think people are thinking more about what that wellness regime is going to look like going forward because you really have to focus on being healthy in this world now where these viruses can shift. This is a super virus if we have ever seen it. And the thing we know, thank God from the data I've seen, this one mutates slowly. So they are optimistic that we can get a vaccination for it.

But that doesn't mean the next one will be like this. So what do we know? We have to be healthy. And I think that cannabis, yoga, exercise, all of these things are a part of a shift in society that we are seeing. And I think it will find its place from a wellness standpoint. And I think also if I'm honest, I'm worried about the mindset of our population because people are at home with each other in a way that they haven't been at home with each other in a long time. We know the purchasing of guns have gone up in this time. And I'm worried about the confluence of alcohol, guns and being around someone 24/7. It's not funny because I am worried about the spike in violence that we might see in domestic violence. And I know that I'm already reading that, that's happening.

But I think that time and time again, cannabis proves to not stoke violence. It's more of a calming and mind-expanding resource rather than an acidic narrowing. And this is coming from somebody who loves her margaritas and [inaudible 00:10:15] and everything. But so anyway, I do think there's something to be said for how cannabis is going to participate. One more thing I wanted to say about this, the millennials are now ... So in 2008, 2009 I was kind of where the millennials are now, right? In terms of their earning, in terms of where they're living in society. During my generation's time, Diageo, Constellation, all of those groups celebrated because we were home. We weren't going out to eat and spend money in restaurants and movie theaters and at the theater and traveling as much. We were home more, we were cooking at home, but we were spending more on wine and spirits and beers.

And so the wine and spirits and beer industry did incredibly well during that time. And in fact, I recall there was some counterintuitive data that people were actually spending a little bit more on premium things because they were like, well, I'm staying home, I'm saving money. So I can drink a better wine. And so I'm curious to see how this is going to play out in this cohort because we know the millennials are drinking less, the younger millennials especially. And that they are consuming more cannabis. So I'm curious to see what's going to happen as this plays out in terms of pricing and spending patterns.

Seth Adler:
All signs pointing to us as a society, as a global society going towards cannabis.

Emily Paxhia:
Yes.

Seth Adler:
So that's at least a silver lining, a way to end this one. Unfortunately, the next time we catch up, which will be in about a month, I would imagine we're going to have a very similar setup, but hopefully things will have gotten at least a little bit better globally, societally.

Emily Paxhia:
Yeah. And I think it would be really neat because we are working on pulling this data together. It'll be neat to see. Neat. What's neat? It'll be interesting to see what's happened in the time that we've not been on this conversation.

Seth Adler:
And that's it. I've changed my emails to everyone. Hope you and yours are safe during these crazy times. I've changed crazy to interesting, which was my mother's favorite word. And I think that's the word. This is interesting. There's no way around that, right?

Emily Paxhia:
It's fascinating.

Seth Adler:
Yeah. Okay, Emily Paxhia, we will leave it there. Thank you so much as always. I love doing these no matter what the construct is around us. How about that?

Emily Paxhia:
Me too.

Seth Adler:
And there you have Emily Paxhia. Very much appreciate her time. Very much appreciate your time. Stay tuned.

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