CANNAINVESTOR Magazine May 2017 - Page 223


Instead Tesla is developing new technology that disrupts the auto industry on a global scale and quite literally changes everything in that industry. Tesla has a market valuation of US$53 billion despite having revenue of only $7 billion. General Motors has a market cap of $52 billion with low-profit-margin revenues of $166 billion.

The cannabis industry has existing in artisanal form for hundreds or thousands of years but the newly legalized industry is still in diapers. As is true in every burgeoning new industry, there will be rapid disruption from time to time as different minds attack problems from unique new angles. The Canadian cannabis industry is rapidly putting its newly-found billion dollars to work building production capacity furiously to grow as many plants as possible to meet the expected new demand. Some have asked whether that demand will actually materialize and of course no one knows for sure, although the experiences in newly legalized jurisdictions like Colorado, Oregon and elsewhere seem to consistently point to high demand. In other words: aggressive growth projections may in fact be accurate.

BUT – what about hard-to-predict technology that disrupts an industry: the way Tesla is doing in the auto business? What if technology comes along that allows for a plant to grow twice as fast; or produce twice the yield? Those sorts of disruptions can really throw ice-water on an industry building to capacity because all of a sudden there would be 2x overcapacity. Thankfully for both the growers and their investors, there is no known technology of this sort on the horizon – indoor cannabis cultivation techniques have long been maximized due to its former illegality forcing the highest yield from the smallest space.

There will be disruption in the cannabis industry but if you are looking at cultivation you are looking in the wrong direction. Seed to plant is optimized or nearly so. Plants to extracts are not as far along the evolutionary curve but already quite advanced with CO2 extraction together with refined distillation available and more. Where the real disruption lies is in what is becoming known as plant-to-bloodstream, and the reasons for this are simple but widely ignored.

When a person smokes either cannabis or tobacco, an average of 30% - 35% of the active ingredients are absorbed into the bloodstream. Actual absorption rates can vary from 10% to 60% depending on smoking techniques and more. Inhaling fine particulates into the lungs is not a healthful method of medicating which is why there are very few pharma-grade or prescription drugs that utilize that methodology.